Correlation Between Zijin Mining and NEXTDC

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

Diversification Opportunities for Zijin Mining and NEXTDC

0.6

Correlation Coefficient

Zijin Mining  NEXTDC

Poor diversification

The 3 months correlation between Zijin and NEXTDC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD 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 NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of Zijin Mining i.e., Zijin Mining and NEXTDC go up and down completely randomly.

Pair Corralation between Zijin Mining and NEXTDC

Assuming the 90 days horizon Zijin Mining Group is expected to under-perform the NEXTDC. In addition to that, Zijin Mining is 1.68 times more volatile than NEXTDC LTD. It trades about -0.1 of its total potential returns per unit of risk. NEXTDC LTD is currently generating about -0.13 per unit of volatility. If you would invest  965.00  in NEXTDC LTD on October 10, 2024 and sell it today you would lose (50.00) from holding NEXTDC LTD or give up 5.18% of portfolio value over 90 days.

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

Zijin Mining Group  vs.  NEXTDC LTD

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NEXTDC LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXTDC LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Zijin Mining and NEXTDC

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

The idea behind Zijin Mining Group and NEXTDC LTD 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.