Correlation Between Chengtun Mining and Henan Shenhuo

Can any of the company-specific risk be diversified away by investing in both Chengtun Mining and Henan Shenhuo 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 Henan Shenhuo 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 Henan Shenhuo Coal, you can compare the effects of market volatilities on Chengtun Mining and Henan Shenhuo 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 Henan Shenhuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengtun Mining and Henan Shenhuo.

Diversification Opportunities for Chengtun Mining and Henan Shenhuo

0.08

Correlation Coefficient

Chengtun Mining  Henan Shenhuo

Significant diversification

The 3 months correlation between Chengtun and Henan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chengtun Mining Group and Henan Shenhuo Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henan Shenhuo Coal 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 Henan Shenhuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henan Shenhuo Coal has no effect on the direction of Chengtun Mining i.e., Chengtun Mining and Henan Shenhuo go up and down completely randomly.

Pair Corralation between Chengtun Mining and Henan Shenhuo

Assuming the 90 days trading horizon Chengtun Mining Group is expected to generate 0.73 times more return on investment than Henan Shenhuo. However, Chengtun Mining Group is 1.37 times less risky than Henan Shenhuo. It trades about 0.06 of its potential returns per unit of risk. Henan Shenhuo Coal is currently generating about 0.01 per unit of risk. If you would invest  479.00  in Chengtun Mining Group on October 5, 2024 and sell it today you would earn a total of  8.00  from holding Chengtun Mining Group or generate 1.67% return on investment over 90 days.

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

Chengtun Mining Group  vs.  Henan Shenhuo Coal

Chengtun Mining Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Henan Shenhuo Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henan Shenhuo Coal 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 Chengtun Mining and Henan Shenhuo

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

The idea behind Chengtun Mining Group and Henan Shenhuo Coal 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 Commodity Directory module to find actively traded commodities issued by global exchanges.