Correlation Between China Southern and Zijin Mining

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

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

Diversification Opportunities for China Southern and Zijin Mining

-0.65

Correlation Coefficient

China Southern  Zijin Mining

Excellent diversification

The 3 months correlation between China and Zijin is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Southern Airlines and Zijin Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zijin Mining Group and China Southern 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 China Southern Airlines are associated (or correlated) with Zijin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zijin Mining Group has no effect on the direction of China Southern i.e., China Southern and Zijin Mining go up and down completely randomly.

Pair Corralation between China Southern and Zijin Mining

Assuming the 90 days trading horizon China Southern Airlines is expected to under-perform the Zijin Mining. But the stock apears to be less risky and, when comparing its historical volatility, China Southern Airlines is 1.28 times less risky than Zijin Mining. The stock trades about -0.01 of its potential returns per unit of risk. The Zijin Mining Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Zijin Mining Group on October 10, 2024 and sell it today you would earn a total of  77.00  from holding Zijin Mining Group or generate 77.78% return on investment over 90 days.

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

China Southern Airlines  vs.  Zijin Mining Group

China Southern Airlines

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Southern Airlines are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, China Southern reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite latest fragile 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 China Southern and Zijin Mining

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

The idea behind China Southern Airlines and Zijin Mining 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.