Correlation Between Zijin Mining and Liaoning Dingjide

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

Diversification Opportunities for Zijin Mining and Liaoning Dingjide

-0.24

Correlation Coefficient

Zijin Mining  Liaoning Dingjide

Very good diversification

The 3 months correlation between Zijin and Liaoning is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Liaoning Dingjide Petrochemica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Dingjide 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 Liaoning Dingjide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Dingjide has no effect on the direction of Zijin Mining i.e., Zijin Mining and Liaoning Dingjide go up and down completely randomly.

Pair Corralation between Zijin Mining and Liaoning Dingjide

Assuming the 90 days trading horizon Zijin Mining Group is expected to under-perform the Liaoning Dingjide. But the stock apears to be less risky and, when comparing its historical volatility, Zijin Mining Group is 1.62 times less risky than Liaoning Dingjide. The stock trades about -0.02 of its potential returns per unit of risk. The Liaoning Dingjide Petrochemical is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,494  in Liaoning Dingjide Petrochemical on September 20, 2024 and sell it today you would earn a total of  816.00  from holding Liaoning Dingjide Petrochemical or generate 32.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Zijin Mining Group  vs.  Liaoning Dingjide Petrochemica

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.

Liaoning Dingjide

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liaoning Dingjide Petrochemical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liaoning Dingjide sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zijin Mining and Liaoning Dingjide

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

The idea behind Zijin Mining Group and Liaoning Dingjide Petrochemical 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.