Correlation Between China Minmetals and China National

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

Diversification Opportunities for China Minmetals and China National

0.26

Correlation Coefficient

China Minmetals  China National

Modest diversification

The 3 months correlation between China and China is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and China National Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Software 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 China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Software has no effect on the direction of China Minmetals i.e., China Minmetals and China National go up and down completely randomly.

Pair Corralation between China Minmetals and China National

Assuming the 90 days trading horizon China Minmetals Rare is expected to generate 0.87 times more return on investment than China National. However, China Minmetals Rare is 1.15 times less risky than China National. It trades about 0.07 of its potential returns per unit of risk. China National Software is currently generating about -0.07 per unit of risk. If you would invest  2,885  in China Minmetals Rare on December 23, 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.  China National Software

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.

China National Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days China National Software 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 Minmetals and China National

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

The idea behind China Minmetals Rare and China National Software 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.