Correlation Between Chengtun Mining and Hangzhou Weiguang

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

Diversification Opportunities for Chengtun Mining and Hangzhou Weiguang

-0.4

Correlation Coefficient

Chengtun Mining  Hangzhou Weiguang

Very good diversification

The 3 months correlation between Chengtun and Hangzhou is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chengtun Mining Group and Hangzhou Weiguang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Weiguang 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 Hangzhou Weiguang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Weiguang has no effect on the direction of Chengtun Mining i.e., Chengtun Mining and Hangzhou Weiguang go up and down completely randomly.

Pair Corralation between Chengtun Mining and Hangzhou Weiguang

Assuming the 90 days trading horizon Chengtun Mining Group is expected to generate 0.71 times more return on investment than Hangzhou Weiguang. However, Chengtun Mining Group is 1.4 times less risky than Hangzhou Weiguang. It trades about 0.28 of its potential returns per unit of risk. Hangzhou Weiguang Electronic is currently generating about 0.07 per unit of risk. If you would invest  466.00  in Chengtun Mining Group on October 22, 2024 and sell it today you would earn a total of  49.00  from holding Chengtun Mining Group or generate 10.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Chengtun Mining Group  vs.  Hangzhou Weiguang Electronic

Chengtun Mining Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 4 (%) 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.

Hangzhou Weiguang

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Weiguang Electronic are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Weiguang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengtun Mining and Hangzhou Weiguang

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

The idea behind Chengtun Mining Group and Hangzhou Weiguang Electronic 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.