Correlation Between MidCap Financial and Zijin Mining

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

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

Diversification Opportunities for MidCap Financial and Zijin Mining

0.06

Correlation Coefficient

MidCap Financial  Zijin Mining

Significant diversification

The 3 months correlation between MidCap and Zijin is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment 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 MidCap Financial 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 MidCap Financial Investment 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 MidCap Financial i.e., MidCap Financial and Zijin Mining go up and down completely randomly.

Pair Corralation between MidCap Financial and Zijin Mining

Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the Zijin Mining. But the stock apears to be less risky and, when comparing its historical volatility, MidCap Financial Investment is 2.38 times less risky than Zijin Mining. The stock trades about -0.07 of its potential returns per unit of risk. The Zijin Mining Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  167.00  in Zijin Mining Group on December 21, 2024 and sell it today you would earn a total of  41.00  from holding Zijin Mining Group or generate 24.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

MidCap Financial Investment  vs.  Zijin Mining Group

MidCap Financial Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days MidCap Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MidCap Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Zijin Mining Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zijin Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MidCap Financial and Zijin Mining

The main advantage of trading using opposite MidCap Financial and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial 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 MidCap Financial Investment 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.