Correlation Between Zijin Mining and Tengda Construction

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

Diversification Opportunities for Zijin Mining and Tengda Construction

0.06

Correlation Coefficient

Zijin Mining  Tengda Construction

Significant diversification

The 3 months correlation between Zijin and Tengda is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Tengda Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tengda Construction 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 Tengda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tengda Construction has no effect on the direction of Zijin Mining i.e., Zijin Mining and Tengda Construction go up and down completely randomly.

Pair Corralation between Zijin Mining and Tengda Construction

Assuming the 90 days trading horizon Zijin Mining Group is expected to generate 1.18 times more return on investment than Tengda Construction. However, Zijin Mining is 1.18 times more volatile than Tengda Construction Group. It trades about 0.05 of its potential returns per unit of risk. Tengda Construction Group is currently generating about 0.01 per unit of risk. If you would invest  983.00  in Zijin Mining Group on September 20, 2024 and sell it today you would earn a total of  549.00  from holding Zijin Mining Group or generate 55.85% return on investment over 90 days.

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

Zijin Mining Group  vs.  Tengda Construction Group

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 somewhat strong basic indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tengda Construction

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tengda Construction Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tengda Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zijin Mining and Tengda Construction

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

The idea behind Zijin Mining Group and Tengda Construction Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.