Correlation Between Dalian Thermal and Uroica Mining

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

By analyzing existing cross correlation between Dalian Thermal Power and Uroica Mining Safety, you can compare the effects of market volatilities on Dalian Thermal and Uroica Mining 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 Dalian Thermal with a short position of Uroica Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Thermal and Uroica Mining.

Diversification Opportunities for Dalian Thermal and Uroica Mining

0.17

Correlation Coefficient

Dalian Thermal  Uroica Mining

Average diversification

The 3 months correlation between Dalian and Uroica is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and Uroica Mining Safety in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uroica Mining Safety and Dalian Thermal 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 Dalian Thermal Power are associated (or correlated) with Uroica Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uroica Mining Safety has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and Uroica Mining go up and down completely randomly.

Pair Corralation between Dalian Thermal and Uroica Mining

Assuming the 90 days trading horizon Dalian Thermal Power is expected to under-perform the Uroica Mining. But the stock apears to be less risky and, when comparing its historical volatility, Dalian Thermal Power is 1.2 times less risky than Uroica Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Uroica Mining Safety is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  617.00  in Uroica Mining Safety on December 30, 2024 and sell it today you would earn a total of  54.00  from holding Uroica Mining Safety or generate 8.75% return on investment over 90 days.

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

Dalian Thermal Power  vs.  Uroica Mining Safety

Dalian Thermal Power

Risk-Adjusted Performance

Very Weak

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

Uroica Mining Safety

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Uroica Mining Safety are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Uroica Mining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dalian Thermal and Uroica Mining

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

The idea behind Dalian Thermal Power and Uroica Mining Safety 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.