Correlation Between Chengtun Mining and China World

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

Diversification Opportunities for Chengtun Mining and China World

-0.44

Correlation Coefficient

Chengtun Mining  China World

Very good diversification

The 3 months correlation between Chengtun and China is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chengtun Mining Group and China World Trade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China World Trade 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 China World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China World Trade has no effect on the direction of Chengtun Mining i.e., Chengtun Mining and China World go up and down completely randomly.

Pair Corralation between Chengtun Mining and China World

Assuming the 90 days trading horizon Chengtun Mining Group is expected to under-perform the China World. In addition to that, Chengtun Mining is 1.47 times more volatile than China World Trade. It trades about -0.01 of its total potential returns per unit of risk. China World Trade is currently generating about 0.07 per unit of volatility. If you would invest  1,525  in China World Trade on September 20, 2024 and sell it today you would earn a total of  931.00  from holding China World Trade or generate 61.05% return on investment over 90 days.

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

Chengtun Mining Group  vs.  China World Trade

Chengtun Mining Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 15 (%) 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.

China World Trade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China World Trade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chengtun Mining and China World

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

The idea behind Chengtun Mining Group and China World Trade 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.