Correlation Between China Nonferrous and Xinjiang Baodi

Can any of the company-specific risk be diversified away by investing in both China Nonferrous and Xinjiang Baodi 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 China Nonferrous and Xinjiang Baodi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Nonferrous Metal and Xinjiang Baodi Mining, you can compare the effects of market volatilities on China Nonferrous and Xinjiang Baodi 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 China Nonferrous with a short position of Xinjiang Baodi. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Xinjiang Baodi.

Diversification Opportunities for China Nonferrous and Xinjiang Baodi

0.49

Correlation Coefficient

China Nonferrous  Xinjiang Baodi

Very weak diversification

The 3 months correlation between China and Xinjiang is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding China Nonferrous Metal and Xinjiang Baodi Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Baodi Mining and China Nonferrous 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 China Nonferrous Metal are associated (or correlated) with Xinjiang Baodi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Baodi Mining has no effect on the direction of China Nonferrous i.e., China Nonferrous and Xinjiang Baodi go up and down completely randomly.

Pair Corralation between China Nonferrous and Xinjiang Baodi

Assuming the 90 days trading horizon China Nonferrous Metal is expected to generate 0.59 times more return on investment than Xinjiang Baodi. However, China Nonferrous Metal is 1.69 times less risky than Xinjiang Baodi. It trades about -0.07 of its potential returns per unit of risk. Xinjiang Baodi Mining is currently generating about -0.07 per unit of risk. If you would invest  521.00  in China Nonferrous Metal on December 4, 2024 and sell it today you would lose (29.00) from holding China Nonferrous Metal or give up 5.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

China Nonferrous Metal  vs.  Xinjiang Baodi Mining

China Nonferrous Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Nonferrous Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Nonferrous is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xinjiang Baodi Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xinjiang Baodi 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 China Nonferrous and Xinjiang Baodi

The main advantage of trading using opposite China Nonferrous and Xinjiang Baodi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Nonferrous position performs unexpectedly, Xinjiang Baodi 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 Xinjiang Baodi will offset losses from the drop in Xinjiang Baodi's long position.

The idea behind China Nonferrous Metal and Xinjiang Baodi 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.