Correlation Between Zijin Mining and RWE AG

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

Diversification Opportunities for Zijin Mining and RWE AG

0.2

Correlation Coefficient

Zijin Mining  RWE AG

Modest diversification

The 3 months correlation between Zijin and RWE is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of Zijin Mining i.e., Zijin Mining and RWE AG go up and down completely randomly.

Pair Corralation between Zijin Mining and RWE AG

Assuming the 90 days horizon Zijin Mining Group is expected to generate 2.32 times more return on investment than RWE AG. However, Zijin Mining is 2.32 times more volatile than RWE AG. It trades about 0.06 of its potential returns per unit of risk. RWE AG is currently generating about -0.05 per unit of risk. If you would invest  121.00  in Zijin Mining Group on October 8, 2024 and sell it today you would earn a total of  55.00  from holding Zijin Mining Group or generate 45.45% return on investment over 90 days.

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

Zijin Mining Group  vs.  RWE AG

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.

RWE AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zijin Mining and RWE AG

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

The idea behind Zijin Mining Group and RWE AG 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.