Correlation Between Shandong Gold and Inner Mongolia

Can any of the company-specific risk be diversified away by investing in both Shandong Gold and Inner Mongolia 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 Shandong Gold and Inner Mongolia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Gold Mining and Inner Mongolia Junzheng, you can compare the effects of market volatilities on Shandong Gold and Inner Mongolia 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 Shandong Gold with a short position of Inner Mongolia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Gold and Inner Mongolia.

Diversification Opportunities for Shandong Gold and Inner Mongolia

-0.75

Correlation Coefficient

Shandong Gold  Inner Mongolia

Pay attention - limited upside

The 3 months correlation between Shandong and Inner is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and Inner Mongolia Junzheng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Junzheng and Shandong Gold 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 Shandong Gold Mining are associated (or correlated) with Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia Junzheng has no effect on the direction of Shandong Gold i.e., Shandong Gold and Inner Mongolia go up and down completely randomly.

Pair Corralation between Shandong Gold and Inner Mongolia

Assuming the 90 days trading horizon Shandong Gold Mining is expected to under-perform the Inner Mongolia. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Gold Mining is 2.79 times less risky than Inner Mongolia. The stock trades about -0.22 of its potential returns per unit of risk. The Inner Mongolia Junzheng is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Inner Mongolia Junzheng on September 28, 2024 and sell it today you would earn a total of  87.00  from holding Inner Mongolia Junzheng or generate 18.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Shandong Gold Mining  vs.  Inner Mongolia Junzheng

Shandong Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Inner Mongolia Junzheng

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inner Mongolia Junzheng are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inner Mongolia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Gold and Inner Mongolia

The main advantage of trading using opposite Shandong Gold and Inner Mongolia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shandong Gold position performs unexpectedly, Inner Mongolia 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 Inner Mongolia will offset losses from the drop in Inner Mongolia's long position.

The idea behind Shandong Gold Mining and Inner Mongolia Junzheng 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.