Correlation Between Sinomine Resource and Yunnan Aluminium

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

By analyzing existing cross correlation between Sinomine Resource Exploration and Yunnan Aluminium Co, you can compare the effects of market volatilities on Sinomine Resource and Yunnan Aluminium 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 Sinomine Resource with a short position of Yunnan Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinomine Resource and Yunnan Aluminium.

Diversification Opportunities for Sinomine Resource and Yunnan Aluminium

-0.23

Correlation Coefficient

Sinomine Resource  Yunnan Aluminium

Very good diversification

The 3 months correlation between Sinomine and Yunnan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sinomine Resource Exploration and Yunnan Aluminium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Aluminium and Sinomine Resource 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 Sinomine Resource Exploration are associated (or correlated) with Yunnan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Aluminium has no effect on the direction of Sinomine Resource i.e., Sinomine Resource and Yunnan Aluminium go up and down completely randomly.

Pair Corralation between Sinomine Resource and Yunnan Aluminium

Assuming the 90 days trading horizon Sinomine Resource Exploration is expected to under-perform the Yunnan Aluminium. But the stock apears to be less risky and, when comparing its historical volatility, Sinomine Resource Exploration is 1.25 times less risky than Yunnan Aluminium. The stock trades about -0.08 of its potential returns per unit of risk. The Yunnan Aluminium Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,375  in Yunnan Aluminium Co on December 27, 2024 and sell it today you would earn a total of  376.00  from holding Yunnan Aluminium Co or generate 27.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Sinomine Resource Exploration  vs.  Yunnan Aluminium Co

Sinomine Resource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinomine Resource Exploration 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.

Yunnan Aluminium

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yunnan Aluminium Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yunnan Aluminium sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sinomine Resource and Yunnan Aluminium

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

The idea behind Sinomine Resource Exploration and Yunnan Aluminium Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.