Correlation Between MC Mining and China Coal

Can any of the company-specific risk be diversified away by investing in both MC Mining and China Coal 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 MC Mining and China Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MC Mining and China Coal Energy, you can compare the effects of market volatilities on MC Mining and China Coal 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 MC Mining with a short position of China Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of MC Mining and China Coal.

Diversification Opportunities for MC Mining and China Coal

0.0

Correlation Coefficient

MC Mining  China Coal

Pay attention - limited upside

The 3 months correlation between G1V and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MC Mining and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy and MC 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 MC Mining are associated (or correlated) with China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of MC Mining i.e., MC Mining and China Coal go up and down completely randomly.

Pair Corralation between MC Mining and China Coal

Assuming the 90 days horizon MC Mining is expected to generate 30.29 times more return on investment than China Coal. However, MC Mining is 30.29 times more volatile than China Coal Energy. It trades about 0.09 of its potential returns per unit of risk. China Coal Energy is currently generating about 0.06 per unit of risk. If you would invest  18.00  in MC Mining on October 12, 2024 and sell it today you would lose (17.85) from holding MC Mining or give up 99.17% of portfolio value over 90 days.

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

MC Mining  vs.  China Coal Energy

MC Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MC Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MC Mining reported solid returns over the last few months and may actually be approaching a breakup point.

China Coal Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Coal Energy 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.

Pair Trading with MC Mining and China Coal

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

The idea behind MC Mining and China Coal Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.