Correlation Between Stepan and Zijin Mining

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

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

Diversification Opportunities for Stepan and Zijin Mining

0.01

Correlation Coefficient

Stepan  Zijin Mining

Significant diversification

The 3 months correlation between Stepan and Zijin is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company 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 Stepan 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 Stepan Company 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 Stepan i.e., Stepan and Zijin Mining go up and down completely randomly.

Pair Corralation between Stepan and Zijin Mining

Considering the 90-day investment horizon Stepan Company is expected to under-perform the Zijin Mining. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 2.03 times less risky than Zijin Mining. The stock trades about -0.09 of its potential returns per unit of risk. The Zijin Mining Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  197.00  in Zijin Mining Group on September 21, 2024 and sell it today you would lose (12.00) from holding Zijin Mining Group or give up 6.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Stepan Company  vs.  Zijin Mining Group

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Zijin Mining Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zijin Mining Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stepan and Zijin Mining

The main advantage of trading using opposite Stepan and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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 Stepan Company 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.