Correlation Between China Molybdenum and Magna Mining

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

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

Diversification Opportunities for China Molybdenum and Magna Mining

-0.64

Correlation Coefficient

China Molybdenum  Magna Mining

Excellent diversification

The 3 months correlation between China and Magna is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Mining and China Molybdenum 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 China Molybdenum Co are associated (or correlated) with Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of China Molybdenum i.e., China Molybdenum and Magna Mining go up and down completely randomly.

Pair Corralation between China Molybdenum and Magna Mining

Assuming the 90 days horizon China Molybdenum Co is expected to generate 1.38 times more return on investment than Magna Mining. However, China Molybdenum is 1.38 times more volatile than Magna Mining. It trades about -0.06 of its potential returns per unit of risk. Magna Mining is currently generating about -0.13 per unit of risk. If you would invest  75.00  in China Molybdenum Co on October 1, 2024 and sell it today you would lose (6.00) from holding China Molybdenum Co or give up 8.0% of portfolio value over 90 days.

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

China Molybdenum Co  vs.  Magna Mining

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Magna Mining

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with China Molybdenum and Magna Mining

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

The idea behind China Molybdenum Co and Magna 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.

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.