Correlation Between Zijin Mining and GEM

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

Diversification Opportunities for Zijin Mining and GEM

0.28

Correlation Coefficient

Zijin Mining  GEM

Modest diversification

The 3 months correlation between Zijin and GEM is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and GEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEM Co 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 GEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEM Co has no effect on the direction of Zijin Mining i.e., Zijin Mining and GEM go up and down completely randomly.

Pair Corralation between Zijin Mining and GEM

Assuming the 90 days trading horizon Zijin Mining Group is expected to generate 1.64 times more return on investment than GEM. However, Zijin Mining is 1.64 times more volatile than GEM Co. It trades about 0.0 of its potential returns per unit of risk. GEM Co is currently generating about -0.23 per unit of risk. If you would invest  1,554  in Zijin Mining Group on September 27, 2024 and sell it today you would lose (2.00) from holding Zijin Mining Group or give up 0.13% of portfolio value over 90 days.

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

Zijin Mining Group  vs.  GEM Co

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 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.

GEM Co

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GEM Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GEM 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 GEM

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

The idea behind Zijin Mining Group and GEM 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.