Correlation Between Auto Trader and Zhaojin Mining

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

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

Diversification Opportunities for Auto Trader and Zhaojin Mining

0.47

Correlation Coefficient

Auto Trader  Zhaojin Mining

Very weak diversification

The 3 months correlation between Auto and Zhaojin is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Zhaojin Mining Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhaojin Mining Industry and Auto Trader 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 Auto Trader Group are associated (or correlated) with Zhaojin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhaojin Mining Industry has no effect on the direction of Auto Trader i.e., Auto Trader and Zhaojin Mining go up and down completely randomly.

Pair Corralation between Auto Trader and Zhaojin Mining

Assuming the 90 days trading horizon Auto Trader is expected to generate 1.61 times less return on investment than Zhaojin Mining. But when comparing it to its historical volatility, Auto Trader Group is 2.12 times less risky than Zhaojin Mining. It trades about 0.05 of its potential returns per unit of risk. Zhaojin Mining Industry is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  104.00  in Zhaojin Mining Industry on October 24, 2024 and sell it today you would earn a total of  42.00  from holding Zhaojin Mining Industry or generate 40.38% return on investment over 90 days.

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

Auto Trader Group  vs.  Zhaojin Mining Industry

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Zhaojin Mining Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhaojin Mining Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Auto Trader and Zhaojin Mining

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

The idea behind Auto Trader Group and Zhaojin Mining Industry 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.