Correlation Between China Aluminum and Qingdao Port

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Can any of the company-specific risk be diversified away by investing in both China Aluminum and Qingdao Port 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 China Aluminum and Qingdao Port into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Aluminum International and Qingdao Port International, you can compare the effects of market volatilities on China Aluminum and Qingdao Port 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 China Aluminum with a short position of Qingdao Port. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aluminum and Qingdao Port.

Diversification Opportunities for China Aluminum and Qingdao Port

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between China and Qingdao is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Aluminum International and Qingdao Port International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Port Interna and China Aluminum 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 China Aluminum International are associated (or correlated) with Qingdao Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Port Interna has no effect on the direction of China Aluminum i.e., China Aluminum and Qingdao Port go up and down completely randomly.

Pair Corralation between China Aluminum and Qingdao Port

Assuming the 90 days trading horizon China Aluminum is expected to generate 3.07 times less return on investment than Qingdao Port. In addition to that, China Aluminum is 1.5 times more volatile than Qingdao Port International. It trades about 0.01 of its total potential returns per unit of risk. Qingdao Port International is currently generating about 0.07 per unit of volatility. If you would invest  522.00  in Qingdao Port International on September 14, 2024 and sell it today you would earn a total of  324.00  from holding Qingdao Port International or generate 62.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

China Aluminum International  vs.  Qingdao Port International

 Performance 
       Timeline  
China Aluminum Inter 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in China Aluminum International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Aluminum sustained solid returns over the last few months and may actually be approaching a breakup point.
Qingdao Port Interna 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Qingdao Port International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Qingdao Port is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Aluminum and Qingdao Port Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Aluminum and Qingdao Port

The main advantage of trading using opposite China Aluminum and Qingdao Port positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aluminum position performs unexpectedly, Qingdao Port 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 Qingdao Port will offset losses from the drop in Qingdao Port's long position.
The idea behind China Aluminum International and Qingdao Port International 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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