Correlation Between Chengtun Mining and Jizhong Energy

Can any of the company-specific risk be diversified away by investing in both Chengtun Mining and Jizhong Energy 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 Chengtun Mining and Jizhong Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengtun Mining Group and Jizhong Energy Resources, you can compare the effects of market volatilities on Chengtun Mining and Jizhong Energy 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 Chengtun Mining with a short position of Jizhong Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengtun Mining and Jizhong Energy.

Diversification Opportunities for Chengtun Mining and Jizhong Energy

0.8

Correlation Coefficient

Chengtun Mining  Jizhong Energy

Very poor diversification

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

Pair Corralation between Chengtun Mining and Jizhong Energy

Assuming the 90 days trading horizon Chengtun Mining Group is expected to generate 1.52 times more return on investment than Jizhong Energy. However, Chengtun Mining is 1.52 times more volatile than Jizhong Energy Resources. It trades about 0.11 of its potential returns per unit of risk. Jizhong Energy Resources is currently generating about 0.0 per unit of risk. If you would invest  337.00  in Chengtun Mining Group on September 14, 2024 and sell it today you would earn a total of  159.00  from holding Chengtun Mining Group or generate 47.18% return on investment over 90 days.

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

Chengtun Mining Group  vs.  Jizhong Energy Resources

Chengtun Mining Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Jizhong Energy Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jizhong Energy Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jizhong Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengtun Mining and Jizhong Energy

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

The idea behind Chengtun Mining Group and Jizhong Energy Resources 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.