Correlation Between Jiangxi Ganfeng and Shandong Gold

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

By analyzing existing cross correlation between Jiangxi Ganfeng Lithium and Shandong Gold Mining, you can compare the effects of market volatilities on Jiangxi Ganfeng and Shandong Gold 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 Jiangxi Ganfeng with a short position of Shandong Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiangxi Ganfeng and Shandong Gold.

Diversification Opportunities for Jiangxi Ganfeng and Shandong Gold

0.1

Correlation Coefficient

Jiangxi Ganfeng  Shandong Gold

Average diversification

The 3 months correlation between Jiangxi and Shandong is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Ganfeng Lithium and Shandong Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Gold Mining and Jiangxi Ganfeng 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 Jiangxi Ganfeng Lithium are associated (or correlated) with Shandong Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Gold Mining has no effect on the direction of Jiangxi Ganfeng i.e., Jiangxi Ganfeng and Shandong Gold go up and down completely randomly.

Pair Corralation between Jiangxi Ganfeng and Shandong Gold

Assuming the 90 days trading horizon Jiangxi Ganfeng Lithium is expected to under-perform the Shandong Gold. In addition to that, Jiangxi Ganfeng is 1.39 times more volatile than Shandong Gold Mining. It trades about -0.09 of its total potential returns per unit of risk. Shandong Gold Mining is currently generating about -0.02 per unit of volatility. If you would invest  2,523  in Shandong Gold Mining on November 19, 2024 and sell it today you would lose (61.00) from holding Shandong Gold Mining or give up 2.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Jiangxi Ganfeng Lithium  vs.  Shandong Gold Mining

Jiangxi Ganfeng Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiangxi Ganfeng Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shandong Gold Mining

Risk-Adjusted Performance

Weak

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

Pair Trading with Jiangxi Ganfeng and Shandong Gold

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

The idea behind Jiangxi Ganfeng Lithium and Shandong Gold Mining 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.