Correlation Between Watsco and Zijin Mining
Can any of the company-specific risk be diversified away by investing in both Watsco 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 Watsco and Zijin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and Zijin Mining Group, you can compare the effects of market volatilities on Watsco 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 Watsco with a short position of Zijin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and Zijin Mining.
Diversification Opportunities for Watsco and Zijin Mining
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Watsco and Zijin is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc 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 Watsco 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 Watsco Inc 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 Watsco i.e., Watsco and Zijin Mining go up and down completely randomly.
Pair Corralation between Watsco and Zijin Mining
Assuming the 90 days horizon Watsco is expected to generate 1.13 times less return on investment than Zijin Mining. But when comparing it to its historical volatility, Watsco Inc is 1.89 times less risky than Zijin Mining. It trades about 0.1 of its potential returns per unit of risk. Zijin Mining Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 88.00 in Zijin Mining Group on September 3, 2024 and sell it today you would earn a total of 89.00 from holding Zijin Mining Group or generate 101.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watsco Inc vs. Zijin Mining Group
Performance |
| Timeline |
| Watsco Inc |
| Zijin Mining Group |
Watsco and Zijin Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watsco and Zijin Mining
The main advantage of trading using opposite Watsco and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco 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.| Watsco vs. Zijin Mining Group | Watsco vs. VARIOUS EATERIES LS | Watsco vs. Evolution Mining Limited | Watsco vs. Waste Management |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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