Correlation Between Jinhui Mining and Wuxi Chemical

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

Diversification Opportunities for Jinhui Mining and Wuxi Chemical

-0.06

Correlation Coefficient

Jinhui Mining  Wuxi Chemical

Good diversification

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

Pair Corralation between Jinhui Mining and Wuxi Chemical

Assuming the 90 days trading horizon Jinhui Mining Co is expected to under-perform the Wuxi Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Jinhui Mining Co is 1.2 times less risky than Wuxi Chemical. The stock trades about -0.01 of its potential returns per unit of risk. The Wuxi Chemical Equipment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,443  in Wuxi Chemical Equipment on October 9, 2024 and sell it today you would lose (105.00) from holding Wuxi Chemical Equipment or give up 3.05% of portfolio value over 90 days.

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

Jinhui Mining Co  vs.  Wuxi Chemical Equipment

Jinhui Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinhui Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Wuxi Chemical Equipment

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Chemical Equipment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuxi Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jinhui Mining and Wuxi Chemical

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

The idea behind Jinhui Mining Co and Wuxi Chemical Equipment 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.