Correlation Between Henan Shenhuo and Zijin Mining

Can any of the company-specific risk be diversified away by investing in both Henan Shenhuo and Zijin Mining 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 Henan Shenhuo and Zijin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Henan Shenhuo Coal and Zijin Mining Group, you can compare the effects of market volatilities on Henan Shenhuo and Zijin Mining 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 Henan Shenhuo with a short position of Zijin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henan Shenhuo and Zijin Mining.

Diversification Opportunities for Henan Shenhuo and Zijin Mining

0.83

Correlation Coefficient

Henan Shenhuo  Zijin Mining

Very poor diversification

The 3 months correlation between Henan and Zijin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Henan Shenhuo Coal and Zijin Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zijin Mining Group and Henan Shenhuo 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 Henan Shenhuo Coal are associated (or correlated) with Zijin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zijin Mining Group has no effect on the direction of Henan Shenhuo i.e., Henan Shenhuo and Zijin Mining go up and down completely randomly.

Pair Corralation between Henan Shenhuo and Zijin Mining

Assuming the 90 days trading horizon Henan Shenhuo Coal is expected to under-perform the Zijin Mining. In addition to that, Henan Shenhuo is 1.38 times more volatile than Zijin Mining Group. It trades about -0.05 of its total potential returns per unit of risk. Zijin Mining Group is currently generating about -0.03 per unit of volatility. If you would invest  1,732  in Zijin Mining Group on September 19, 2024 and sell it today you would lose (187.00) from holding Zijin Mining Group or give up 10.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.18%
Values	Daily Returns

Henan Shenhuo Coal  vs.  Zijin Mining Group

Henan Shenhuo Coal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Henan Shenhuo Coal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henan Shenhuo sustained solid returns over the last few months and may actually be approaching a breakup point.

Zijin Mining Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Henan Shenhuo and Zijin Mining

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

The idea behind Henan Shenhuo Coal and Zijin Mining Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.