Correlation Between STMicroelectronics and Zijin Mining

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

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

Diversification Opportunities for STMicroelectronics and Zijin Mining

-0.75

Correlation Coefficient

STMicroelectronics  Zijin Mining

Pay attention - limited upside

The 3 months correlation between STMicroelectronics and Zijin is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR 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 STMicroelectronics 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 STMicroelectronics NV ADR 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 STMicroelectronics i.e., STMicroelectronics and Zijin Mining go up and down completely randomly.

Pair Corralation between STMicroelectronics and Zijin Mining

Considering the 90-day investment horizon STMicroelectronics NV ADR is expected to under-perform the Zijin Mining. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV ADR is 1.51 times less risky than Zijin Mining. The stock trades about -0.2 of its potential returns per unit of risk. The Zijin Mining Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Zijin Mining Group on February 11, 2024 and sell it today you would earn a total of  44.00  from holding Zijin Mining Group or generate 23.04% return on investment over 90 days.

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

STMicroelectronics NV ADR  vs.  Zijin Mining Group

STMicroelectronics NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Zijin Mining Group

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Zijin Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STMicroelectronics and Zijin Mining

The main advantage of trading using opposite STMicroelectronics and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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 STMicroelectronics NV ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.