Correlation Between MAG SILVER and China Railway

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

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

Diversification Opportunities for MAG SILVER and China Railway

0.2

Correlation Coefficient

MAG SILVER  China Railway

Modest diversification

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

Pair Corralation between MAG SILVER and China Railway

Assuming the 90 days trading horizon MAG SILVER is expected to generate 1.43 times more return on investment than China Railway. However, MAG SILVER is 1.43 times more volatile than China Railway Group. It trades about 0.25 of its potential returns per unit of risk. China Railway Group is currently generating about -0.13 per unit of risk. If you would invest  1,336  in MAG SILVER on October 23, 2024 and sell it today you would earn a total of  143.00  from holding MAG SILVER or generate 10.7% return on investment over 90 days.

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

MAG SILVER  vs.  China Railway Group

MAG SILVER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAG SILVER has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

China Railway Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MAG SILVER and China Railway

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

The idea behind MAG SILVER and China Railway Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.