Correlation Between GALENA MINING and China Communications

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

By analyzing existing cross correlation between GALENA MINING LTD and China Communications Construction, you can compare the effects of market volatilities on GALENA MINING and China 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 GALENA MINING with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of GALENA MINING and China Communications.

Diversification Opportunities for GALENA MINING and China Communications

0.0

Correlation Coefficient

GALENA MINING  China Communications

Pay attention - limited upside

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

Pair Corralation between GALENA MINING and China Communications

Assuming the 90 days horizon GALENA MINING LTD is expected to under-perform the China Communications. But the stock apears to be less risky and, when comparing its historical volatility, GALENA MINING LTD is 1.08 times less risky than China Communications. The stock trades about -0.02 of its potential returns per unit of risk. The China Communications Construction is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8.06  in China Communications Construction on October 26, 2024 and sell it today you would earn a total of  52.94  from holding China Communications Construction or generate 656.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

GALENA MINING LTD  vs.  China Communications Construct

GALENA MINING LTD

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GALENA MINING and China Communications

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

The idea behind GALENA MINING LTD and China Communications Construction 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.