Correlation Between Minmetals Capital and Guangzhou Dongfang

Can any of the company-specific risk be diversified away by investing in both Minmetals Capital and Guangzhou Dongfang 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 Minmetals Capital and Guangzhou Dongfang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Minmetals Capital Co and Guangzhou Dongfang Hotel, you can compare the effects of market volatilities on Minmetals Capital and Guangzhou Dongfang 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 Minmetals Capital with a short position of Guangzhou Dongfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Minmetals Capital and Guangzhou Dongfang.

Diversification Opportunities for Minmetals Capital and Guangzhou Dongfang

0.54

Correlation Coefficient

Minmetals Capital  Guangzhou Dongfang

Very weak diversification

The 3 months correlation between Minmetals and Guangzhou is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Minmetals Capital Co and Guangzhou Dongfang Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Dongfang Hotel and Minmetals Capital 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 Minmetals Capital Co are associated (or correlated) with Guangzhou Dongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Dongfang Hotel has no effect on the direction of Minmetals Capital i.e., Minmetals Capital and Guangzhou Dongfang go up and down completely randomly.

Pair Corralation between Minmetals Capital and Guangzhou Dongfang

Assuming the 90 days trading horizon Minmetals Capital Co is expected to under-perform the Guangzhou Dongfang. In addition to that, Minmetals Capital is 1.29 times more volatile than Guangzhou Dongfang Hotel. It trades about -0.04 of its total potential returns per unit of risk. Guangzhou Dongfang Hotel is currently generating about -0.04 per unit of volatility. If you would invest  1,012  in Guangzhou Dongfang Hotel on October 26, 2024 and sell it today you would lose (77.00) from holding Guangzhou Dongfang Hotel or give up 7.61% of portfolio value over 90 days.

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

Minmetals Capital Co  vs.  Guangzhou Dongfang Hotel

Minmetals Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Minmetals Capital Co 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.

Guangzhou Dongfang Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Minmetals Capital and Guangzhou Dongfang

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

The idea behind Minmetals Capital Co and Guangzhou Dongfang Hotel 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.