Correlation Between China Molybdenum and Dazhong Transportation

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

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

Diversification Opportunities for China Molybdenum and Dazhong Transportation

-0.07

Correlation Coefficient

China Molybdenum  Dazhong Transportation

Good diversification

The 3 months correlation between China and Dazhong is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation and China Molybdenum 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 Molybdenum Co are associated (or correlated) with Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of China Molybdenum i.e., China Molybdenum and Dazhong Transportation go up and down completely randomly.

Pair Corralation between China Molybdenum and Dazhong Transportation

Assuming the 90 days trading horizon China Molybdenum Co is expected to generate 0.93 times more return on investment than Dazhong Transportation. However, China Molybdenum Co is 1.07 times less risky than Dazhong Transportation. It trades about -0.16 of its potential returns per unit of risk. Dazhong Transportation Group is currently generating about -0.46 per unit of risk. If you would invest  729.00  in China Molybdenum Co on September 27, 2024 and sell it today you would lose (40.00) from holding China Molybdenum Co or give up 5.49% of portfolio value over 90 days.

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

China Molybdenum Co  vs.  Dazhong Transportation Group

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dazhong Transportation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dazhong Transportation Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dazhong Transportation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Molybdenum and Dazhong Transportation

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

The idea behind China Molybdenum Co and Dazhong Transportation 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.