Correlation Between China Minmetals and Rising Nonferrous

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

Diversification Opportunities for China Minmetals and Rising Nonferrous

0.91

Correlation Coefficient

China Minmetals  Rising Nonferrous

Almost no diversification

The 3 months correlation between China and Rising is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and Rising Nonferrous Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rising Nonferrous Metals 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 Rising Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rising Nonferrous Metals has no effect on the direction of China Minmetals i.e., China Minmetals and Rising Nonferrous go up and down completely randomly.

Pair Corralation between China Minmetals and Rising Nonferrous

Assuming the 90 days trading horizon China Minmetals Rare is expected to under-perform the Rising Nonferrous. But the stock apears to be less risky and, when comparing its historical volatility, China Minmetals Rare is 1.02 times less risky than Rising Nonferrous. The stock trades about -0.02 of its potential returns per unit of risk. The Rising Nonferrous Metals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,982  in Rising Nonferrous Metals on October 25, 2024 and sell it today you would lose (104.00) from holding Rising Nonferrous Metals or give up 3.49% of portfolio value over 90 days.

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

China Minmetals Rare  vs.  Rising Nonferrous Metals

China Minmetals Rare

Risk-Adjusted Performance

0 of 100

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.

Rising Nonferrous Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rising Nonferrous Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Rising Nonferrous 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 Rising Nonferrous

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

The idea behind China Minmetals Rare and Rising Nonferrous Metals 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.