Correlation Between Albemarle and China Health
Can any of the company-specific risk be diversified away by investing in both Albemarle and China Health 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 Albemarle and China Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albemarle and China Health Industries, you can compare the effects of market volatilities on Albemarle and China Health 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 Albemarle with a short position of China Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albemarle and China Health.
Diversification Opportunities for Albemarle and China Health
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Albemarle and China is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Albemarle and China Health Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Industries and Albemarle 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 Albemarle are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Industries has no effect on the direction of Albemarle i.e., Albemarle and China Health go up and down completely randomly.
Pair Corralation between Albemarle and China Health
Assuming the 90 days trading horizon Albemarle is expected to under-perform the China Health. But the stock apears to be less risky and, when comparing its historical volatility, Albemarle is 14.63 times less risky than China Health. The stock trades about -0.02 of its potential returns per unit of risk. The China Health Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 11.00 in China Health Industries on October 13, 2024 and sell it today you would earn a total of 11.00 from holding China Health Industries or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 43.35% |
| Values | Daily Returns |
Albemarle vs. China Health Industries
Performance |
| Timeline |
| Albemarle |
| China Health Industries |
Albemarle and China Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Albemarle and China Health
The main advantage of trading using opposite Albemarle and China Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albemarle position performs unexpectedly, China Health 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 Health will offset losses from the drop in China Health's long position.| Albemarle vs. Mills Music Trust | Albemarle vs. National Storage REIT | Albemarle vs. Cheche Group Class | Albemarle vs. CDW Corp |
| China Health vs. The Mosaic | China Health vs. Albemarle | China Health vs. Ingredion Incorporated | China Health vs. Axalta Coating Systems |
Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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