Correlation Between Western Mining and Guangdong Qunxing

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

By analyzing existing cross correlation between Western Mining Co and Guangdong Qunxing Toys, you can compare the effects of market volatilities on Western Mining and Guangdong Qunxing 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 Western Mining with a short position of Guangdong Qunxing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Mining and Guangdong Qunxing.

Diversification Opportunities for Western Mining and Guangdong Qunxing

-0.74

Correlation Coefficient

Western Mining  Guangdong Qunxing

Pay attention - limited upside

The 3 months correlation between Western and Guangdong is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Western Mining Co and Guangdong Qunxing Toys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Qunxing Toys and Western 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 Western Mining Co are associated (or correlated) with Guangdong Qunxing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Qunxing Toys has no effect on the direction of Western Mining i.e., Western Mining and Guangdong Qunxing go up and down completely randomly.

Pair Corralation between Western Mining and Guangdong Qunxing

Assuming the 90 days trading horizon Western Mining Co is expected to under-perform the Guangdong Qunxing. But the stock apears to be less risky and, when comparing its historical volatility, Western Mining Co is 2.94 times less risky than Guangdong Qunxing. The stock trades about -0.07 of its potential returns per unit of risk. The Guangdong Qunxing Toys is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  718.00  in Guangdong Qunxing Toys on October 6, 2024 and sell it today you would earn a total of  73.00  from holding Guangdong Qunxing Toys or generate 10.17% return on investment over 90 days.

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

Western Mining Co  vs.  Guangdong Qunxing Toys

Western Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Mining Co 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.

Guangdong Qunxing Toys

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Qunxing Toys are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Qunxing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Mining and Guangdong Qunxing

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

The idea behind Western Mining Co and Guangdong Qunxing Toys 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.