Correlation Between China Minmetals and Shaanxi Broadcast

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

Diversification Opportunities for China Minmetals and Shaanxi Broadcast

0.72

Correlation Coefficient

China Minmetals  Shaanxi Broadcast

Poor diversification

The 3 months correlation between China and Shaanxi is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast 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 Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of China Minmetals i.e., China Minmetals and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between China Minmetals and Shaanxi Broadcast

Assuming the 90 days trading horizon China Minmetals Rare is expected to generate 1.12 times more return on investment than Shaanxi Broadcast. However, China Minmetals is 1.12 times more volatile than Shaanxi Broadcast TV. It trades about 0.08 of its potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about 0.07 per unit of risk. If you would invest  2,842  in China Minmetals Rare on December 25, 2024 and sell it today you would earn a total of  282.00  from holding China Minmetals Rare or generate 9.92% return on investment over 90 days.

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

China Minmetals Rare  vs.  Shaanxi Broadcast TV

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 6 (%) 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.

Shaanxi Broadcast

Risk-Adjusted Performance

Weak

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

Pair Trading with China Minmetals and Shaanxi Broadcast

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

The idea behind China Minmetals Rare and Shaanxi Broadcast TV 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..