Correlation Between MC Mining and CHINA SHENHUA

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

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

Diversification Opportunities for MC Mining and CHINA SHENHUA

0.07

Correlation Coefficient

MC Mining  CHINA SHENHUA

Significant diversification

The 3 months correlation between G1V and CHINA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding MC Mining and CHINA SHENHUA ENA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SHENHUA ENA and MC 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 MC Mining are associated (or correlated) with CHINA SHENHUA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SHENHUA ENA has no effect on the direction of MC Mining i.e., MC Mining and CHINA SHENHUA go up and down completely randomly.

Pair Corralation between MC Mining and CHINA SHENHUA

Assuming the 90 days horizon MC Mining is expected to generate 39.47 times more return on investment than CHINA SHENHUA. However, MC Mining is 39.47 times more volatile than CHINA SHENHUA ENA. It trades about 0.09 of its potential returns per unit of risk. CHINA SHENHUA ENA is currently generating about 0.06 per unit of risk. If you would invest  15.00  in MC Mining on September 23, 2024 and sell it today you would lose (14.85) from holding MC Mining or give up 99.0% of portfolio value over 90 days.

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

MC Mining  vs.  CHINA SHENHUA ENA

MC Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MC Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MC Mining reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA SHENHUA ENA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA SHENHUA ENA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, CHINA SHENHUA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MC Mining and CHINA SHENHUA

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

The idea behind MC Mining and CHINA SHENHUA ENA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.