Correlation Between Shenzhen Zhongzhuang and Zijin Mining

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

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

Diversification Opportunities for Shenzhen Zhongzhuang and Zijin Mining

-0.41

Correlation Coefficient

Shenzhen Zhongzhuang  Zijin Mining

Very good diversification

The 3 months correlation between Shenzhen and Zijin is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Zhongzhuang Construct 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 Shenzhen Zhongzhuang 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 Shenzhen Zhongzhuang Construction 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 Shenzhen Zhongzhuang i.e., Shenzhen Zhongzhuang and Zijin Mining go up and down completely randomly.

Pair Corralation between Shenzhen Zhongzhuang and Zijin Mining

Assuming the 90 days trading horizon Shenzhen Zhongzhuang is expected to generate 2.57 times less return on investment than Zijin Mining. In addition to that, Shenzhen Zhongzhuang is 1.52 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 0.06 per unit of volatility. If you would invest  983.00  in Zijin Mining Group on September 20, 2024 and sell it today you would earn a total of  566.00  from holding Zijin Mining Group or generate 57.58% return on investment over 90 days.

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

Shenzhen Zhongzhuang Construct  vs.  Zijin Mining Group

Shenzhen Zhongzhuang

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

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 Shenzhen Zhongzhuang and Zijin Mining

The main advantage of trading using opposite Shenzhen Zhongzhuang and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen Zhongzhuang 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 Shenzhen Zhongzhuang Construction 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.