Correlation Between Zijin Mining and Zhonghang Electronic

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

Diversification Opportunities for Zijin Mining and Zhonghang Electronic

0.3

Correlation Coefficient

Zijin Mining  Zhonghang Electronic

Weak diversification

The 3 months correlation between Zijin and Zhonghang is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Zhonghang Electronic Measuring in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhonghang Electronic 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 Zhonghang Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhonghang Electronic has no effect on the direction of Zijin Mining i.e., Zijin Mining and Zhonghang Electronic go up and down completely randomly.

Pair Corralation between Zijin Mining and Zhonghang Electronic

Assuming the 90 days trading horizon Zijin Mining Group is expected to under-perform the Zhonghang Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Zijin Mining Group is 2.35 times less risky than Zhonghang Electronic. The stock trades about -0.02 of its potential returns per unit of risk. The Zhonghang Electronic Measuring is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,871  in Zhonghang Electronic Measuring on October 12, 2024 and sell it today you would lose (65.00) from holding Zhonghang Electronic Measuring or give up 0.95% 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.  Zhonghang Electronic Measuring

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.

Zhonghang Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhonghang Electronic Measuring has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhonghang Electronic 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 Zhonghang Electronic

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

The idea behind Zijin Mining Group and Zhonghang Electronic Measuring 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.