Correlation Between Zijin Mining and West African

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

Diversification Opportunities for Zijin Mining and West African

0.86

Correlation Coefficient

Zijin Mining  West African

Very poor diversification

The 3 months correlation between Zijin and West is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and West African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West African Resources 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 West African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West African Resources has no effect on the direction of Zijin Mining i.e., Zijin Mining and West African go up and down completely randomly.

Pair Corralation between Zijin Mining and West African

Assuming the 90 days horizon Zijin Mining is expected to generate 1.92 times less return on investment than West African. But when comparing it to its historical volatility, Zijin Mining Group is 1.08 times less risky than West African. It trades about 0.1 of its potential returns per unit of risk. West African Resources is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  91.00  in West African Resources on October 23, 2024 and sell it today you would earn a total of  9.00  from holding West African Resources or generate 9.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

Zijin Mining Group  vs.  West African Resources

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zijin Mining Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

West African Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West African Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, West African 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 West African

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

The idea behind Zijin Mining Group and West African Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.