Correlation Between Minmetals Capital and Huafa Industrial

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

Diversification Opportunities for Minmetals Capital and Huafa Industrial

0.81

Correlation Coefficient

Minmetals Capital  Huafa Industrial

Very poor diversification

The 3 months correlation between Minmetals and Huafa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Minmetals Capital Co and Huafa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huafa 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 Huafa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huafa Industrial has no effect on the direction of Minmetals Capital i.e., Minmetals Capital and Huafa Industrial go up and down completely randomly.

Pair Corralation between Minmetals Capital and Huafa Industrial

Assuming the 90 days trading horizon Minmetals Capital Co is expected to generate 1.85 times more return on investment than Huafa Industrial. However, Minmetals Capital is 1.85 times more volatile than Huafa Industrial Co. It trades about -0.04 of its potential returns per unit of risk. Huafa Industrial Co is currently generating about -0.23 per unit of risk. If you would invest  670.00  in Minmetals Capital Co on October 24, 2024 and sell it today you would lose (67.00) from holding Minmetals Capital Co or give up 10.0% of portfolio value over 90 days.

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

Minmetals Capital Co  vs.  Huafa Industrial Co

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.

Huafa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huafa Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Minmetals Capital and Huafa Industrial

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

The idea behind Minmetals Capital Co and Huafa Industrial Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.