Correlation Between Zijin Mining and Xinjiang Zhongtai

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

Diversification Opportunities for Zijin Mining and Xinjiang Zhongtai

0.62

Correlation Coefficient

Zijin Mining  Xinjiang Zhongtai

Poor diversification

The 3 months correlation between Zijin and Xinjiang is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Xinjiang Zhongtai Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Zhongtai 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 Xinjiang Zhongtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Zhongtai has no effect on the direction of Zijin Mining i.e., Zijin Mining and Xinjiang Zhongtai go up and down completely randomly.

Pair Corralation between Zijin Mining and Xinjiang Zhongtai

Assuming the 90 days trading horizon Zijin Mining Group is expected to generate 1.56 times more return on investment than Xinjiang Zhongtai. However, Zijin Mining is 1.56 times more volatile than Xinjiang Zhongtai Chemical. It trades about 0.16 of its potential returns per unit of risk. Xinjiang Zhongtai Chemical is currently generating about 0.08 per unit of risk. If you would invest  1,554  in Zijin Mining Group on December 30, 2024 and sell it today you would earn a total of  262.00  from holding Zijin Mining Group or generate 16.86% 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.  Xinjiang Zhongtai Chemical

Zijin Mining Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 12 (%) 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.

Xinjiang Zhongtai

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Zhongtai Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xinjiang Zhongtai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zijin Mining and Xinjiang Zhongtai

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

The idea behind Zijin Mining Group and Xinjiang Zhongtai Chemical 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.