Correlation Between New China and Minmetals Capital

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

Diversification Opportunities for New China and Minmetals Capital

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between New and Minmetals is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding New China Life and Minmetals Capital Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minmetals Capital and New China 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 New China Life are associated (or correlated) with Minmetals Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minmetals Capital has no effect on the direction of New China i.e., New China and Minmetals Capital go up and down completely randomly.

Pair Corralation between New China and Minmetals Capital

Assuming the 90 days trading horizon New China Life is expected to under-perform the Minmetals Capital. But the stock apears to be less risky and, when comparing its historical volatility, New China Life is 1.23 times less risky than Minmetals Capital. The stock trades about -0.06 of its potential returns per unit of risk. The Minmetals Capital Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Minmetals Capital Co on August 29, 2024 and sell it today you would earn a total of  4.00  from holding Minmetals Capital Co or generate 0.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

New China Life  vs.  Minmetals Capital Co

 Performance 
       Timeline  
New China Life 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in New China Life are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New China sustained solid returns over the last few months and may actually be approaching a breakup point.
Minmetals Capital 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Minmetals Capital Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Minmetals Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

New China and Minmetals Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with New China and Minmetals Capital

The main advantage of trading using opposite New China and Minmetals Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New China position performs unexpectedly, Minmetals Capital 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 Minmetals Capital will offset losses from the drop in Minmetals Capital's long position.
The idea behind New China Life and Minmetals Capital Co 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.
Check out your portfolio center.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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