Correlation Between Shandong Gold and JCHX Mining

Can any of the company-specific risk be diversified away by investing in both Shandong Gold and JCHX 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 Shandong Gold and JCHX Mining 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 JCHX Mining Management, you can compare the effects of market volatilities on Shandong Gold and JCHX 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 Shandong Gold with a short position of JCHX Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Gold and JCHX Mining.

Diversification Opportunities for Shandong Gold and JCHX Mining

0.6

Correlation Coefficient

Shandong Gold  JCHX Mining

Poor diversification

The 3 months correlation between Shandong and JCHX is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Gold Mining and JCHX Mining Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JCHX Mining Management 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 JCHX Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JCHX Mining Management has no effect on the direction of Shandong Gold i.e., Shandong Gold and JCHX Mining go up and down completely randomly.

Pair Corralation between Shandong Gold and JCHX Mining

Assuming the 90 days trading horizon Shandong Gold Mining is expected to under-perform the JCHX Mining. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Gold Mining is 1.67 times less risky than JCHX Mining. The stock trades about -0.05 of its potential returns per unit of risk. The JCHX Mining Management is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,902  in JCHX Mining Management on September 2, 2024 and sell it today you would earn a total of  6.00  from holding JCHX Mining Management or generate 0.15% return on investment over 90 days.

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

Shandong Gold Mining  vs.  JCHX Mining Management

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 somewhat strong basic indicators, Shandong Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JCHX Mining Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JCHX Mining Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, JCHX Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shandong Gold and JCHX Mining

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

The idea behind Shandong Gold Mining and JCHX Mining Management 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.