Correlation Between China Minmetals and COL Digital

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

Diversification Opportunities for China Minmetals and COL Digital

0.35

Correlation Coefficient

China Minmetals  COL Digital

Weak diversification

The 3 months correlation between China and COL is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and COL Digital Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COL Digital Publishing 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 COL Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COL Digital Publishing has no effect on the direction of China Minmetals i.e., China Minmetals and COL Digital go up and down completely randomly.

Pair Corralation between China Minmetals and COL Digital

Assuming the 90 days trading horizon China Minmetals Rare is expected to generate 0.75 times more return on investment than COL Digital. However, China Minmetals Rare is 1.34 times less risky than COL Digital. It trades about 0.07 of its potential returns per unit of risk. COL Digital Publishing is currently generating about -0.02 per unit of risk. If you would invest  2,885  in China Minmetals Rare on December 22, 2024 and sell it today you would earn a total of  241.00  from holding China Minmetals Rare or generate 8.35% return on investment over 90 days.

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

China Minmetals Rare  vs.  COL Digital Publishing

China Minmetals Rare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Minmetals Rare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Minmetals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

COL Digital Publishing

Risk-Adjusted Performance

Very Weak

Over the last 90 days COL Digital Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, COL Digital 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 Minmetals and COL Digital

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

The idea behind China Minmetals Rare and COL Digital Publishing 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.