Correlation Between China Publishing and Chengtun Mining

Can any of the company-specific risk be diversified away by investing in both China Publishing and Chengtun Mining 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 China Publishing and Chengtun Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Publishing Media and Chengtun Mining Group, you can compare the effects of market volatilities on China Publishing and Chengtun Mining 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 China Publishing with a short position of Chengtun Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Publishing and Chengtun Mining.

Diversification Opportunities for China Publishing and Chengtun Mining

-0.44

Correlation Coefficient

China Publishing  Chengtun Mining

Very good diversification

The 3 months correlation between China and Chengtun is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Publishing Media and Chengtun Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengtun Mining Group and China Publishing 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 China Publishing Media are associated (or correlated) with Chengtun Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengtun Mining Group has no effect on the direction of China Publishing i.e., China Publishing and Chengtun Mining go up and down completely randomly.

Pair Corralation between China Publishing and Chengtun Mining

Assuming the 90 days trading horizon China Publishing Media is expected to under-perform the Chengtun Mining. But the stock apears to be less risky and, when comparing its historical volatility, China Publishing Media is 1.16 times less risky than Chengtun Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Chengtun Mining Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  466.00  in Chengtun Mining Group on December 25, 2024 and sell it today you would earn a total of  151.00  from holding Chengtun Mining Group or generate 32.4% return on investment over 90 days.

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

China Publishing Media  vs.  Chengtun Mining Group

China Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Publishing Media 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.

Chengtun Mining Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Publishing and Chengtun Mining

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

The idea behind China Publishing Media and Chengtun Mining 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.