Correlation Between Zijin Mining and Bengang Steel

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

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

Diversification Opportunities for Zijin Mining and Bengang Steel

0.6

Correlation Coefficient

Zijin Mining  Bengang Steel

Poor diversification

The 3 months correlation between Zijin and Bengang is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zijin Mining Group and Bengang Steel Plates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengang Steel Plates and Zijin 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 Zijin Mining Group are associated (or correlated) with Bengang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengang Steel Plates has no effect on the direction of Zijin Mining i.e., Zijin Mining and Bengang Steel go up and down completely randomly.

Pair Corralation between Zijin Mining and Bengang Steel

Assuming the 90 days trading horizon Zijin Mining Group is expected to under-perform the Bengang Steel. But the stock apears to be less risky and, when comparing its historical volatility, Zijin Mining Group is 1.37 times less risky than Bengang Steel. The stock trades about -0.02 of its potential returns per unit of risk. The Bengang Steel Plates is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  338.00  in Bengang Steel Plates on September 17, 2024 and sell it today you would earn a total of  19.00  from holding Bengang Steel Plates or generate 5.62% return on investment over 90 days.

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

Zijin Mining Group  vs.  Bengang Steel Plates

Zijin Mining Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bengang Steel Plates

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bengang Steel Plates are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bengang Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zijin Mining and Bengang Steel

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

The idea behind Zijin Mining Group and Bengang Steel Plates 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.