Correlation Between Chengtun Mining and Central China

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

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

Diversification Opportunities for Chengtun Mining and Central China

0.28

Correlation Coefficient

Chengtun Mining  Central China

Modest diversification

The 3 months correlation between Chengtun and Central is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Chengtun Mining Group and Central China Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central China Land and Chengtun Mining 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 Chengtun Mining Group are associated (or correlated) with Central China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central China Land has no effect on the direction of Chengtun Mining i.e., Chengtun Mining and Central China go up and down completely randomly.

Pair Corralation between Chengtun Mining and Central China

Assuming the 90 days trading horizon Chengtun Mining Group is expected to generate 0.83 times more return on investment than Central China. However, Chengtun Mining Group is 1.2 times less risky than Central China. It trades about 0.26 of its potential returns per unit of risk. Central China Land is currently generating about 0.1 per unit of risk. If you would invest  349.00  in Chengtun Mining Group on September 13, 2024 and sell it today you would earn a total of  145.00  from holding Chengtun Mining Group or generate 41.55% return on investment over 90 days.

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

Chengtun Mining Group  vs.  Central China Land

Chengtun Mining Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Central China Land

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central China Land are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central China sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengtun Mining and Central China

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

The idea behind Chengtun Mining Group and Central China Land 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.