Correlation Between MC Mining and CHINA SHENHUA
Can any of the company-specific risk be diversified away by investing in both MC Mining and CHINA SHENHUA 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 MC Mining and CHINA SHENHUA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MC Mining and CHINA SHENHUA ENA, you can compare the effects of market volatilities on MC Mining and CHINA SHENHUA 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 MC Mining with a short position of CHINA SHENHUA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MC Mining and CHINA SHENHUA.
Diversification Opportunities for MC Mining and CHINA SHENHUA
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between G1V and CHINA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MC Mining and CHINA SHENHUA ENA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SHENHUA ENA and MC 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 MC Mining are associated (or correlated) with CHINA SHENHUA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SHENHUA ENA has no effect on the direction of MC Mining i.e., MC Mining and CHINA SHENHUA go up and down completely randomly.
Pair Corralation between MC Mining and CHINA SHENHUA
Assuming the 90 days horizon MC Mining is expected to generate 22.56 times more return on investment than CHINA SHENHUA. However, MC Mining is 22.56 times more volatile than CHINA SHENHUA ENA. It trades about 0.21 of its potential returns per unit of risk. CHINA SHENHUA ENA is currently generating about -0.08 per unit of risk. If you would invest 0.05 in MC Mining on September 2, 2024 and sell it today you would earn a total of 0.10 from holding MC Mining or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MC Mining vs. CHINA SHENHUA ENA
Performance |
| Timeline |
| MC Mining |
| CHINA SHENHUA ENA |
MC Mining and CHINA SHENHUA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MC Mining and CHINA SHENHUA
The main advantage of trading using opposite MC Mining and CHINA SHENHUA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MC Mining position performs unexpectedly, CHINA SHENHUA 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 CHINA SHENHUA will offset losses from the drop in CHINA SHENHUA's long position.The idea behind MC Mining and CHINA SHENHUA ENA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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