Correlation Between Jinhui Mining and Xinjiang Tianrun

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

Diversification Opportunities for Jinhui Mining and Xinjiang Tianrun

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Jinhui and Xinjiang is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Mining Co and Xinjiang Tianrun Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Tianrun Dairy and Jinhui 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 Jinhui Mining Co are associated (or correlated) with Xinjiang Tianrun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Tianrun Dairy has no effect on the direction of Jinhui Mining i.e., Jinhui Mining and Xinjiang Tianrun go up and down completely randomly.

Pair Corralation between Jinhui Mining and Xinjiang Tianrun

Assuming the 90 days trading horizon Jinhui Mining Co is expected to generate 1.04 times more return on investment than Xinjiang Tianrun. However, Jinhui Mining is 1.04 times more volatile than Xinjiang Tianrun Dairy. It trades about 0.0 of its potential returns per unit of risk. Xinjiang Tianrun Dairy is currently generating about -0.04 per unit of risk. If you would invest  1,254  in Jinhui Mining Co on September 12, 2024 and sell it today you would lose (60.00) from holding Jinhui Mining Co or give up 4.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Jinhui Mining Co  vs.  Xinjiang Tianrun Dairy

 Performance 
       Timeline  
Jinhui Mining 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Jinhui Mining Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhui Mining sustained solid returns over the last few months and may actually be approaching a breakup point.
Xinjiang Tianrun Dairy 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Tianrun sustained solid returns over the last few months and may actually be approaching a breakup point.

Jinhui Mining and Xinjiang Tianrun Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Jinhui Mining and Xinjiang Tianrun

The main advantage of trading using opposite Jinhui Mining and Xinjiang Tianrun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jinhui Mining position performs unexpectedly, Xinjiang Tianrun 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 Xinjiang Tianrun will offset losses from the drop in Xinjiang Tianrun's long position.
The idea behind Jinhui Mining Co and Xinjiang Tianrun Dairy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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