Correlation Between Qingdao Choho and Zijin Mining

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Can any of the company-specific risk be diversified away by investing in both Qingdao Choho 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 Qingdao Choho and Zijin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qingdao Choho Industrial and Zijin Mining Group, you can compare the effects of market volatilities on Qingdao Choho 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 Qingdao Choho with a short position of Zijin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Choho and Zijin Mining.

Diversification Opportunities for Qingdao Choho and Zijin Mining

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Qingdao and Zijin is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Choho Industrial 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 Qingdao Choho 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 Qingdao Choho Industrial 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 Qingdao Choho i.e., Qingdao Choho and Zijin Mining go up and down completely randomly.

Pair Corralation between Qingdao Choho and Zijin Mining

Assuming the 90 days trading horizon Qingdao Choho Industrial is expected to generate 1.19 times more return on investment than Zijin Mining. However, Qingdao Choho is 1.19 times more volatile than Zijin Mining Group. It trades about -0.06 of its potential returns per unit of risk. Zijin Mining Group is currently generating about -0.26 per unit of risk. If you would invest  2,730  in Qingdao Choho Industrial on August 28, 2024 and sell it today you would lose (89.00) from holding Qingdao Choho Industrial or give up 3.26% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Qingdao Choho Industrial  vs.  Zijin Mining Group

 Performance 
       Timeline  
Qingdao Choho Industrial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Choho Industrial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Choho sustained solid returns over the last few months and may actually be approaching a breakup point.
Zijin Mining Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 somewhat strong basic indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qingdao Choho and Zijin Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Qingdao Choho and Zijin Mining

The main advantage of trading using opposite Qingdao Choho and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qingdao Choho 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 Qingdao Choho Industrial 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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