Correlation Between Zijin Mining and Lianhe Chemical

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

Diversification Opportunities for Zijin Mining and Lianhe Chemical

-0.25

Correlation Coefficient

Zijin Mining  Lianhe Chemical

Very good diversification

The 3 months correlation between Zijin and Lianhe is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Lianhe Chemical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lianhe Chemical Tech 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 Lianhe Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lianhe Chemical Tech has no effect on the direction of Zijin Mining i.e., Zijin Mining and Lianhe Chemical go up and down completely randomly.

Pair Corralation between Zijin Mining and Lianhe Chemical

Assuming the 90 days trading horizon Zijin Mining Group is expected to under-perform the Lianhe Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Zijin Mining Group is 1.13 times less risky than Lianhe Chemical. The stock trades about -0.05 of its potential returns per unit of risk. The Lianhe Chemical Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Lianhe Chemical Technology on October 2, 2024 and sell it today you would earn a total of  83.00  from holding Lianhe Chemical Technology or generate 17.29% return on investment over 90 days.

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

Zijin Mining Group  vs.  Lianhe Chemical Technology

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zijin Mining Group 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lianhe Chemical Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lianhe Chemical Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zijin Mining and Lianhe Chemical

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

The idea behind Zijin Mining Group and Lianhe Chemical Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.