Correlation Between Zijin Mining and Sunstone Hotel

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

Diversification Opportunities for Zijin Mining and Sunstone Hotel

-0.21

Correlation Coefficient

Zijin Mining  Sunstone Hotel

Very good diversification

The 3 months correlation between Zijin and Sunstone is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors 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 Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of Zijin Mining i.e., Zijin Mining and Sunstone Hotel go up and down completely randomly.

Pair Corralation between Zijin Mining and Sunstone Hotel

Assuming the 90 days horizon Zijin Mining Group is expected to generate 1.43 times more return on investment than Sunstone Hotel. However, Zijin Mining is 1.43 times more volatile than Sunstone Hotel Investors. It trades about 0.03 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.01 per unit of risk. If you would invest  177.00  in Zijin Mining Group on November 29, 2024 and sell it today you would earn a total of  6.00  from holding Zijin Mining Group or generate 3.39% 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.  Sunstone Hotel Investors

Zijin Mining Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sunstone Hotel Investors

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zijin Mining and Sunstone Hotel

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

The idea behind Zijin Mining Group and Sunstone Hotel Investors 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.