Correlation Between Zijin Mining and China Express

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

Diversification Opportunities for Zijin Mining and China Express

-0.31

Correlation Coefficient

Zijin Mining  China Express

Very good diversification

The 3 months correlation between Zijin and China is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and China Express Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Express Airlines 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 China Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Express Airlines has no effect on the direction of Zijin Mining i.e., Zijin Mining and China Express go up and down completely randomly.

Pair Corralation between Zijin Mining and China Express

Assuming the 90 days trading horizon Zijin Mining Group is expected to generate 0.73 times more return on investment than China Express. However, Zijin Mining Group is 1.37 times less risky than China Express. It trades about 0.13 of its potential returns per unit of risk. China Express Airlines is currently generating about -0.05 per unit of risk. If you would invest  1,563  in Zijin Mining Group on December 24, 2024 and sell it today you would earn a total of  194.00  from holding Zijin Mining Group or generate 12.41% 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.  China Express Airlines

Zijin Mining Group

Risk-Adjusted Performance

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.

China Express Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Express Airlines 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 China Express

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

The idea behind Zijin Mining Group and China Express Airlines 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.