Correlation Between MONGOLIA ENERG and MONGOLIAN MINING

Can any of the company-specific risk be diversified away by investing in both MONGOLIA ENERG and MONGOLIAN 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 MONGOLIA ENERG and MONGOLIAN MINING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MONGOLIA ENERG HD 02 and MONGOLIAN MINING CRPREGS, you can compare the effects of market volatilities on MONGOLIA ENERG and MONGOLIAN 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 MONGOLIA ENERG with a short position of MONGOLIAN MINING. Check out your portfolio center. Please also check ongoing floating volatility patterns of MONGOLIA ENERG and MONGOLIAN MINING.

Diversification Opportunities for MONGOLIA ENERG and MONGOLIAN MINING

0.81

Correlation Coefficient

MONGOLIA ENERG  MONGOLIAN MINING

Very poor diversification

The 3 months correlation between MONGOLIA and MONGOLIAN is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding MONGOLIA ENERG HD 02 and MONGOLIAN MINING CRPREGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MONGOLIAN MINING CRPREGS and MONGOLIA ENERG 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 MONGOLIA ENERG HD 02 are associated (or correlated) with MONGOLIAN MINING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MONGOLIAN MINING CRPREGS has no effect on the direction of MONGOLIA ENERG i.e., MONGOLIA ENERG and MONGOLIAN MINING go up and down completely randomly.

Pair Corralation between MONGOLIA ENERG and MONGOLIAN MINING

Assuming the 90 days horizon MONGOLIA ENERG HD 02 is expected to generate 1.75 times more return on investment than MONGOLIAN MINING. However, MONGOLIA ENERG is 1.75 times more volatile than MONGOLIAN MINING CRPREGS. It trades about 0.01 of its potential returns per unit of risk. MONGOLIAN MINING CRPREGS is currently generating about -0.13 per unit of risk. If you would invest  7.80  in MONGOLIA ENERG HD 02 on September 5, 2024 and sell it today you would lose (0.10) from holding MONGOLIA ENERG HD 02 or give up 1.28% of portfolio value over 90 days.

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

MONGOLIA ENERG HD 02  vs.  MONGOLIAN MINING CRPREGS

MONGOLIA ENERG HD

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MONGOLIA ENERG HD 02 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MONGOLIA ENERG reported solid returns over the last few months and may actually be approaching a breakup point.

MONGOLIAN MINING CRPREGS

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with MONGOLIA ENERG and MONGOLIAN MINING

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

The idea behind MONGOLIA ENERG HD 02 and MONGOLIAN MINING CRPREGS 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.