Correlation Between ANGLO AMERICAN and Zijin Mining

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

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

Diversification Opportunities for ANGLO AMERICAN and Zijin Mining

0.7

Correlation Coefficient

ANGLO AMERICAN  Zijin Mining

Poor diversification

The 3 months correlation between ANGLO and Zijin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ANGLO AMERICAN SPADR and Zijin Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zijin Mining Group and ANGLO AMERICAN 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 ANGLO AMERICAN SPADR are associated (or correlated) with Zijin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zijin Mining Group has no effect on the direction of ANGLO AMERICAN i.e., ANGLO AMERICAN and Zijin Mining go up and down completely randomly.

Pair Corralation between ANGLO AMERICAN and Zijin Mining

Assuming the 90 days trading horizon ANGLO AMERICAN SPADR is expected to generate 0.8 times more return on investment than Zijin Mining. However, ANGLO AMERICAN SPADR is 1.24 times less risky than Zijin Mining. It trades about 0.11 of its potential returns per unit of risk. Zijin Mining Group is currently generating about 0.06 per unit of risk. If you would invest  1,210  in ANGLO AMERICAN SPADR on September 5, 2024 and sell it today you would earn a total of  250.00  from holding ANGLO AMERICAN SPADR or generate 20.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

ANGLO AMERICAN SPADR  vs.  Zijin Mining Group

ANGLO AMERICAN SPADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANGLO AMERICAN SPADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, ANGLO AMERICAN reported solid returns over the last few months and may actually be approaching a breakup point.

Zijin Mining Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zijin Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ANGLO AMERICAN and Zijin Mining

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

The idea behind ANGLO AMERICAN SPADR and Zijin Mining Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.