Correlation Between Western Mining and Jinhui Mining

Can any of the company-specific risk be diversified away by investing in both Western Mining and Jinhui 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 Western Mining and Jinhui Mining 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 Jinhui Mining Co, you can compare the effects of market volatilities on Western Mining and Jinhui 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 Western Mining with a short position of Jinhui Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Mining and Jinhui Mining.

Diversification Opportunities for Western Mining and Jinhui Mining

0.88

Correlation Coefficient

Western Mining  Jinhui Mining

Very poor diversification

The 3 months correlation between Western and Jinhui is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Western Mining Co and Jinhui Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Mining 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 Jinhui Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Mining has no effect on the direction of Western Mining i.e., Western Mining and Jinhui Mining go up and down completely randomly.

Pair Corralation between Western Mining and Jinhui Mining

Assuming the 90 days trading horizon Western Mining is expected to generate 17.53 times less return on investment than Jinhui Mining. But when comparing it to its historical volatility, Western Mining Co is 1.01 times less risky than Jinhui Mining. It trades about 0.0 of its potential returns per unit of risk. Jinhui Mining Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,096  in Jinhui Mining Co on September 24, 2024 and sell it today you would earn a total of  72.00  from holding Jinhui Mining Co or generate 6.57% return on investment over 90 days.

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

Western Mining Co  vs.  Jinhui Mining Co

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 somewhat strong basic indicators, Western Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jinhui Mining

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Western Mining and Jinhui Mining

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

The idea behind Western Mining Co and Jinhui Mining Co 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.