Correlation Between GEM and Zijin Mining

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

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

Diversification Opportunities for GEM and Zijin Mining

0.37

Correlation Coefficient

GEM  Zijin Mining

Weak diversification

The 3 months correlation between GEM and Zijin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding GEM Co 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 GEM 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 GEM Co 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 GEM i.e., GEM and Zijin Mining go up and down completely randomly.

Pair Corralation between GEM and Zijin Mining

Assuming the 90 days trading horizon GEM Co is expected to under-perform the Zijin Mining. In addition to that, GEM is 1.02 times more volatile than Zijin Mining Group. It trades about -0.01 of its total potential returns per unit of risk. Zijin Mining Group is currently generating about 0.05 per unit of volatility. If you would invest  1,134  in Zijin Mining Group on October 15, 2024 and sell it today you would earn a total of  506.00  from holding Zijin Mining Group or generate 44.62% return on investment over 90 days.

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

GEM Co  vs.  Zijin Mining Group

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GEM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zijin Mining Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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 GEM and Zijin Mining

The main advantage of trading using opposite GEM and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEM 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 GEM Co 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.