Correlation Between China Minmetals and Jiangxi Ganfeng

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

By analyzing existing cross correlation between China Minmetals Rare and Jiangxi Ganfeng Lithium, you can compare the effects of market volatilities on China Minmetals and Jiangxi Ganfeng 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 Minmetals with a short position of Jiangxi Ganfeng. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Minmetals and Jiangxi Ganfeng.

Diversification Opportunities for China Minmetals and Jiangxi Ganfeng

0.85

Correlation Coefficient

China Minmetals  Jiangxi Ganfeng

Very poor diversification

The 3 months correlation between China and Jiangxi is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and Jiangxi Ganfeng Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Ganfeng Lithium and China Minmetals 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 Minmetals Rare are associated (or correlated) with Jiangxi Ganfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Ganfeng Lithium has no effect on the direction of China Minmetals i.e., China Minmetals and Jiangxi Ganfeng go up and down completely randomly.

Pair Corralation between China Minmetals and Jiangxi Ganfeng

Assuming the 90 days trading horizon China Minmetals Rare is expected to generate 0.93 times more return on investment than Jiangxi Ganfeng. However, China Minmetals Rare is 1.07 times less risky than Jiangxi Ganfeng. It trades about -0.01 of its potential returns per unit of risk. Jiangxi Ganfeng Lithium is currently generating about -0.12 per unit of risk. If you would invest  3,098  in China Minmetals Rare on November 27, 2024 and sell it today you would lose (75.00) from holding China Minmetals Rare or give up 2.42% of portfolio value over 90 days.

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

China Minmetals Rare  vs.  Jiangxi Ganfeng Lithium

China Minmetals Rare

Risk-Adjusted Performance

Very Weak

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

Jiangxi Ganfeng Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangxi Ganfeng Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Minmetals and Jiangxi Ganfeng

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

The idea behind China Minmetals Rare and Jiangxi Ganfeng Lithium 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.