Correlation Between China Nonferrous and Western Mining

Can any of the company-specific risk be diversified away by investing in both China Nonferrous and Western Mining 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 Western Mining 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 Western Mining Co, you can compare the effects of market volatilities on China Nonferrous and Western Mining 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 Western Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Western Mining.

Diversification Opportunities for China Nonferrous and Western Mining

0.77

Correlation Coefficient

China Nonferrous  Western Mining

Poor diversification

The 3 months correlation between China and Western is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding China Nonferrous Metal and Western Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western 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 Western Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Mining has no effect on the direction of China Nonferrous i.e., China Nonferrous and Western Mining go up and down completely randomly.

Pair Corralation between China Nonferrous and Western Mining

Assuming the 90 days trading horizon China Nonferrous is expected to generate 3.97 times less return on investment than Western Mining. But when comparing it to its historical volatility, China Nonferrous Metal is 1.05 times less risky than Western Mining. It trades about 0.02 of its potential returns per unit of risk. Western Mining Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  909.00  in Western Mining Co on September 20, 2024 and sell it today you would earn a total of  719.00  from holding Western Mining Co or generate 79.1% return on investment over 90 days.

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

China Nonferrous Metal  vs.  Western Mining Co

China Nonferrous Metal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Nonferrous Metal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Nonferrous sustained solid returns over the last few months and may actually be approaching a breakup point.

Western Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Mining Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Western Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Nonferrous and Western Mining

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

The idea behind China Nonferrous Metal and Western Mining Co 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.