Correlation Between Guocheng Mining and Zhengzhou Coal

Can any of the company-specific risk be diversified away by investing in both Guocheng Mining and Zhengzhou Coal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Guocheng Mining and Zhengzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guocheng Mining Co and Zhengzhou Coal Mining, you can compare the effects of market volatilities on Guocheng Mining and Zhengzhou Coal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Guocheng Mining with a short position of Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guocheng Mining and Zhengzhou Coal.

Diversification Opportunities for Guocheng Mining and Zhengzhou Coal

0.31

Correlation Coefficient

Guocheng Mining  Zhengzhou Coal

Weak diversification

The 3 months correlation between Guocheng and Zhengzhou is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and Guocheng Mining is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Guocheng Mining Co are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Guocheng Mining and Zhengzhou Coal

Assuming the 90 days trading horizon Guocheng Mining Co is expected to generate 1.58 times more return on investment than Zhengzhou Coal. However, Guocheng Mining is 1.58 times more volatile than Zhengzhou Coal Mining. It trades about 0.09 of its potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about -0.04 per unit of risk. If you would invest  942.00  in Guocheng Mining Co on September 29, 2024 and sell it today you would earn a total of  342.00  from holding Guocheng Mining Co or generate 36.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Guocheng Mining Co  vs.  Zhengzhou Coal Mining

Guocheng Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guocheng Mining Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guocheng Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zhengzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhengzhou Coal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guocheng Mining and Zhengzhou Coal

The main advantage of trading using opposite Guocheng Mining and Zhengzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guocheng Mining position performs unexpectedly, Zhengzhou Coal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zhengzhou Coal will offset losses from the drop in Zhengzhou Coal's long position.

The idea behind Guocheng Mining Co and Zhengzhou Coal Mining pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.