Correlation Between China Asset and Sinomine Resource

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

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

Diversification Opportunities for China Asset and Sinomine Resource

-0.16

Correlation Coefficient

China Asset  Sinomine Resource

Good diversification

The 3 months correlation between China and Sinomine is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding China Asset Management and Sinomine Resource Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinomine Resource and China Asset 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 China Asset Management are associated (or correlated) with Sinomine Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinomine Resource has no effect on the direction of China Asset i.e., China Asset and Sinomine Resource go up and down completely randomly.

Pair Corralation between China Asset and Sinomine Resource

Assuming the 90 days trading horizon China Asset Management is expected to generate 0.77 times more return on investment than Sinomine Resource. However, China Asset Management is 1.3 times less risky than Sinomine Resource. It trades about 0.13 of its potential returns per unit of risk. Sinomine Resource Exploration is currently generating about -0.07 per unit of risk. If you would invest  355.00  in China Asset Management on December 25, 2024 and sell it today you would earn a total of  32.00  from holding China Asset Management or generate 9.01% return on investment over 90 days.

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

China Asset Management  vs.  Sinomine Resource Exploration

China Asset Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with China Asset and Sinomine Resource

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

The idea behind China Asset Management and Sinomine Resource Exploration 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.