Correlation Between Minmetals Capital and Sichuan Yahua

Can any of the company-specific risk be diversified away by investing in both Minmetals Capital and Sichuan Yahua 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 Sichuan Yahua 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 Sichuan Yahua Industrial, you can compare the effects of market volatilities on Minmetals Capital and Sichuan Yahua 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 Sichuan Yahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Minmetals Capital and Sichuan Yahua.

Diversification Opportunities for Minmetals Capital and Sichuan Yahua

0.91

Correlation Coefficient

Minmetals Capital  Sichuan Yahua

Almost no diversification

The 3 months correlation between Minmetals and Sichuan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Minmetals Capital Co and Sichuan Yahua Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Yahua Industrial 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 Sichuan Yahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Yahua Industrial has no effect on the direction of Minmetals Capital i.e., Minmetals Capital and Sichuan Yahua go up and down completely randomly.

Pair Corralation between Minmetals Capital and Sichuan Yahua

Assuming the 90 days trading horizon Minmetals Capital Co is expected to generate 1.37 times more return on investment than Sichuan Yahua. However, Minmetals Capital is 1.37 times more volatile than Sichuan Yahua Industrial. It trades about 0.23 of its potential returns per unit of risk. Sichuan Yahua Industrial is currently generating about 0.18 per unit of risk. If you would invest  401.00  in Minmetals Capital Co on September 1, 2024 and sell it today you would earn a total of  318.00  from holding Minmetals Capital Co or generate 79.3% return on investment over 90 days.

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

Minmetals Capital Co  vs.  Sichuan Yahua Industrial

Minmetals Capital

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Minmetals Capital Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Minmetals Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Sichuan Yahua Industrial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Yahua Industrial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Yahua sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Minmetals Capital and Sichuan Yahua

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

The idea behind Minmetals Capital Co and Sichuan Yahua Industrial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.