Correlation Between Chengtun Mining and Xinjiang Goldwind

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

Diversification Opportunities for Chengtun Mining and Xinjiang Goldwind

0.91

Correlation Coefficient

Chengtun Mining  Xinjiang Goldwind

Almost no diversification

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

Pair Corralation between Chengtun Mining and Xinjiang Goldwind

Assuming the 90 days trading horizon Chengtun Mining Group is expected to under-perform the Xinjiang Goldwind. But the stock apears to be less risky and, when comparing its historical volatility, Chengtun Mining Group is 2.07 times less risky than Xinjiang Goldwind. The stock trades about -0.07 of its potential returns per unit of risk. The Xinjiang Goldwind Science is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,046  in Xinjiang Goldwind Science on September 27, 2024 and sell it today you would earn a total of  18.00  from holding Xinjiang Goldwind Science or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Chengtun Mining Group  vs.  Xinjiang Goldwind Science

Chengtun Mining Group

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 8 (%) 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.

Xinjiang Goldwind Science

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Goldwind Science are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Goldwind sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengtun Mining and Xinjiang Goldwind

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

The idea behind Chengtun Mining Group and Xinjiang Goldwind Science 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.