Correlation Between Jinhui Mining and Shantui Construction

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

By analyzing existing cross correlation between Jinhui Mining Co and Shantui Construction Machinery, you can compare the effects of market volatilities on Jinhui Mining and Shantui 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 Jinhui Mining with a short position of Shantui Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhui Mining and Shantui Construction.

Diversification Opportunities for Jinhui Mining and Shantui Construction

0.42

Correlation Coefficient

Jinhui Mining  Shantui Construction

Very weak diversification

The 3 months correlation between Jinhui and Shantui is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Mining Co and Shantui Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantui Construction and Jinhui 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 Jinhui Mining Co are associated (or correlated) with Shantui Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantui Construction has no effect on the direction of Jinhui Mining i.e., Jinhui Mining and Shantui Construction go up and down completely randomly.

Pair Corralation between Jinhui Mining and Shantui Construction

Assuming the 90 days trading horizon Jinhui Mining Co is expected to generate 0.55 times more return on investment than Shantui Construction. However, Jinhui Mining Co is 1.81 times less risky than Shantui Construction. It trades about 0.05 of its potential returns per unit of risk. Shantui Construction Machinery is currently generating about 0.02 per unit of risk. If you would invest  1,141  in Jinhui Mining Co on December 25, 2024 and sell it today you would earn a total of  42.00  from holding Jinhui Mining Co or generate 3.68% return on investment over 90 days.

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

Jinhui Mining Co  vs.  Shantui Construction Machinery

Jinhui Mining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jinhui Mining Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jinhui Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shantui Construction

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shantui Construction Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shantui Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jinhui Mining and Shantui Construction

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

The idea behind Jinhui Mining Co and Shantui Construction Machinery 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.