Correlation Between Zijin Mining and Linedata Services

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

Diversification Opportunities for Zijin Mining and Linedata Services

-0.36

Correlation Coefficient

Zijin Mining  Linedata Services

Very good diversification

The 3 months correlation between Zijin and Linedata is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Linedata Services SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linedata Services 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 Linedata Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linedata Services has no effect on the direction of Zijin Mining i.e., Zijin Mining and Linedata Services go up and down completely randomly.

Pair Corralation between Zijin Mining and Linedata Services

Assuming the 90 days horizon Zijin Mining Group is expected to generate 1.78 times more return on investment than Linedata Services. However, Zijin Mining is 1.78 times more volatile than Linedata Services SA. It trades about 0.15 of its potential returns per unit of risk. Linedata Services SA is currently generating about -0.02 per unit of risk. If you would invest  167.00  in Zijin Mining Group on December 23, 2024 and sell it today you would earn a total of  44.00  from holding Zijin Mining Group or generate 26.35% return on investment over 90 days.

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

Zijin Mining Group  vs.  Linedata Services SA

Zijin Mining Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zijin Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Linedata Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linedata Services SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Linedata Services is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zijin Mining and Linedata Services

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

The idea behind Zijin Mining Group and Linedata Services SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.