Correlation Between Zijin Mining and Zhejiang Huayou

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

Diversification Opportunities for Zijin Mining and Zhejiang Huayou

0.03

Correlation Coefficient

Zijin Mining  Zhejiang Huayou

Significant diversification

The 3 months correlation between Zijin and Zhejiang is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Zhejiang Huayou Cobalt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Huayou Cobalt 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 Zhejiang Huayou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Huayou Cobalt has no effect on the direction of Zijin Mining i.e., Zijin Mining and Zhejiang Huayou go up and down completely randomly.

Pair Corralation between Zijin Mining and Zhejiang Huayou

Assuming the 90 days trading horizon Zijin Mining Group is expected to under-perform the Zhejiang Huayou. But the stock apears to be less risky and, when comparing its historical volatility, Zijin Mining Group is 1.5 times less risky than Zhejiang Huayou. The stock trades about -0.04 of its potential returns per unit of risk. The Zhejiang Huayou Cobalt is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,854  in Zhejiang Huayou Cobalt on October 15, 2024 and sell it today you would lose (67.00) from holding Zhejiang Huayou Cobalt or give up 2.35% of portfolio value over 90 days.

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

Zijin Mining Group  vs.  Zhejiang Huayou Cobalt

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.

Zhejiang Huayou Cobalt

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Zijin Mining Group and Zhejiang Huayou Cobalt 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.