Correlation Between Shandong Iron and Zijin Mining

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

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

Diversification Opportunities for Shandong Iron and Zijin Mining

-0.35

Correlation Coefficient

Shandong Iron  Zijin Mining

Very good diversification

The 3 months correlation between Shandong and Zijin is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Iron and 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 Shandong Iron 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 Shandong Iron and 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 Shandong Iron i.e., Shandong Iron and Zijin Mining go up and down completely randomly.

Pair Corralation between Shandong Iron and Zijin Mining

Assuming the 90 days trading horizon Shandong Iron and is expected to under-perform the Zijin Mining. In addition to that, Shandong Iron is 1.2 times more volatile than Zijin Mining Group. It trades about -0.4 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  1,588  in Zijin Mining Group on October 9, 2024 and sell it today you would lose (39.00) from holding Zijin Mining Group or give up 2.46% of portfolio value over 90 days.

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

Shandong Iron and  vs.  Zijin Mining Group

Shandong Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Iron and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shandong Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zijin Mining Group 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 Shandong Iron and Zijin Mining

The main advantage of trading using opposite Shandong Iron and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Iron 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 Shandong Iron and 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.