Correlation Between Hainan Mining and Jiangxi Naipu

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

By analyzing existing cross correlation between Hainan Mining Co and Jiangxi Naipu Mining, you can compare the effects of market volatilities on Hainan Mining and Jiangxi Naipu 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 Hainan Mining with a short position of Jiangxi Naipu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hainan Mining and Jiangxi Naipu.

Diversification Opportunities for Hainan Mining and Jiangxi Naipu

0.83

Correlation Coefficient

Hainan Mining  Jiangxi Naipu

Very poor diversification

The 3 months correlation between Hainan and Jiangxi is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hainan Mining Co and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining and Hainan 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 Hainan Mining Co are associated (or correlated) with Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of Hainan Mining i.e., Hainan Mining and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between Hainan Mining and Jiangxi Naipu

Assuming the 90 days trading horizon Hainan Mining Co is expected to generate 1.93 times more return on investment than Jiangxi Naipu. However, Hainan Mining is 1.93 times more volatile than Jiangxi Naipu Mining. It trades about 0.1 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about -0.06 per unit of risk. If you would invest  703.00  in Hainan Mining Co on September 30, 2024 and sell it today you would earn a total of  41.00  from holding Hainan Mining Co or generate 5.83% return on investment over 90 days.

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

Hainan Mining Co  vs.  Jiangxi Naipu Mining

Hainan Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Mining Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jiangxi Naipu Mining

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Hainan Mining and Jiangxi Naipu

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

The idea behind Hainan Mining Co and Jiangxi Naipu Mining 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.