Correlation Between Zijin Mining and Jiaozuo Wanfang

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

By analyzing existing cross correlation between Zijin Mining Group and Jiaozuo Wanfang Aluminum, you can compare the effects of market volatilities on Zijin Mining and Jiaozuo Wanfang 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 Zijin Mining with a short position of Jiaozuo Wanfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zijin Mining and Jiaozuo Wanfang.

Diversification Opportunities for Zijin Mining and Jiaozuo Wanfang

0.68

Correlation Coefficient

Zijin Mining  Jiaozuo Wanfang

Poor diversification

The 3 months correlation between Zijin and Jiaozuo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and Zijin 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 Zijin Mining Group are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of Zijin Mining i.e., Zijin Mining and Jiaozuo Wanfang go up and down completely randomly.

Pair Corralation between Zijin Mining and Jiaozuo Wanfang

Assuming the 90 days trading horizon Zijin Mining is expected to generate 2.68 times less return on investment than Jiaozuo Wanfang. But when comparing it to its historical volatility, Zijin Mining Group is 1.74 times less risky than Jiaozuo Wanfang. It trades about 0.11 of its potential returns per unit of risk. Jiaozuo Wanfang Aluminum is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  512.00  in Jiaozuo Wanfang Aluminum on September 12, 2024 and sell it today you would earn a total of  204.00  from holding Jiaozuo Wanfang Aluminum or generate 39.84% return on investment over 90 days.

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

Zijin Mining Group  vs.  Jiaozuo Wanfang Aluminum

Zijin Mining Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zijin Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiaozuo Wanfang Aluminum are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiaozuo Wanfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zijin Mining and Jiaozuo Wanfang

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

The idea behind Zijin Mining Group and Jiaozuo Wanfang Aluminum 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.