Correlation Between Zijin Mining and Hubei Forbon

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

Diversification Opportunities for Zijin Mining and Hubei Forbon

0.41

Correlation Coefficient

Zijin Mining  Hubei Forbon

Very weak diversification

The 3 months correlation between Zijin and Hubei is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Hubei Forbon Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubei Forbon Technology 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 Hubei Forbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubei Forbon Technology has no effect on the direction of Zijin Mining i.e., Zijin Mining and Hubei Forbon go up and down completely randomly.

Pair Corralation between Zijin Mining and Hubei Forbon

Assuming the 90 days trading horizon Zijin Mining is expected to generate 4.4 times less return on investment than Hubei Forbon. But when comparing it to its historical volatility, Zijin Mining Group is 1.93 times less risky than Hubei Forbon. It trades about 0.07 of its potential returns per unit of risk. Hubei Forbon Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  638.00  in Hubei Forbon Technology on September 6, 2024 and sell it today you would earn a total of  231.00  from holding Hubei Forbon Technology or generate 36.21% return on investment over 90 days.

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

Zijin Mining Group  vs.  Hubei Forbon Technology

Zijin Mining Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zijin Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hubei Forbon Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Forbon Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Forbon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zijin Mining and Hubei Forbon

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

The idea behind Zijin Mining Group and Hubei Forbon 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.