Correlation Between Zijin Mining and Spirent Communications

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

Diversification Opportunities for Zijin Mining and Spirent Communications

-0.46

Correlation Coefficient

Zijin Mining  Spirent Communications

Very good diversification

The 3 months correlation between Zijin and Spirent is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Zijin Mining i.e., Zijin Mining and Spirent Communications go up and down completely randomly.

Pair Corralation between Zijin Mining and Spirent Communications

Assuming the 90 days horizon Zijin Mining is expected to generate 1.12 times less return on investment than Spirent Communications. But when comparing it to its historical volatility, Zijin Mining Group is 1.36 times less risky than Spirent Communications. It trades about 0.07 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  137.00  in Spirent Communications plc on October 5, 2024 and sell it today you would earn a total of  75.00  from holding Spirent Communications plc or generate 54.74% return on investment over 90 days.

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

Zijin Mining Group  vs.  Spirent Communications plc

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 fragile 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.

Spirent Communications

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Spirent Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zijin Mining and Spirent Communications

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

The idea behind Zijin Mining Group and Spirent Communications plc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.