Correlation Between International Consolidated and Zhaojin Mining

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

By analyzing existing cross correlation between International Consolidated Airlines and Zhaojin Mining Industry, you can compare the effects of market volatilities on International Consolidated and Zhaojin Mining 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 International Consolidated with a short position of Zhaojin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Zhaojin Mining.

Diversification Opportunities for International Consolidated and Zhaojin Mining

0.03

Correlation Coefficient

International Consolidated  Zhaojin Mining

Significant diversification

The 3 months correlation between International and Zhaojin is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Zhaojin Mining Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhaojin Mining Industry and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with Zhaojin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhaojin Mining Industry has no effect on the direction of International Consolidated i.e., International Consolidated and Zhaojin Mining go up and down completely randomly.

Pair Corralation between International Consolidated and Zhaojin Mining

Assuming the 90 days horizon International Consolidated Airlines is expected to under-perform the Zhaojin Mining. But the stock apears to be less risky and, when comparing its historical volatility, International Consolidated Airlines is 1.5 times less risky than Zhaojin Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Zhaojin Mining Industry is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Zhaojin Mining Industry on December 23, 2024 and sell it today you would earn a total of  43.00  from holding Zhaojin Mining Industry or generate 32.58% return on investment over 90 days.

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

International Consolidated Air  vs.  Zhaojin Mining Industry

International Consolidated

Risk-Adjusted Performance

Very Weak

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

Zhaojin Mining Industry

Risk-Adjusted Performance

OK

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

Pair Trading with International Consolidated and Zhaojin Mining

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

The idea behind International Consolidated Airlines and Zhaojin Mining Industry 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.