Correlation Between Aluminumof China and Big 5
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Big 5 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 Aluminumof China and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Big 5 Sporting, you can compare the effects of market volatilities on Aluminumof China and Big 5 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 Aluminumof China with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Big 5.
Diversification Opportunities for Aluminumof China and Big 5
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aluminumof and Big is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Aluminumof China 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 Aluminum of are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Aluminumof China i.e., Aluminumof China and Big 5 go up and down completely randomly.
Pair Corralation between Aluminumof China and Big 5
Assuming the 90 days horizon Aluminum of is expected to generate 1.14 times more return on investment than Big 5. However, Aluminumof China is 1.14 times more volatile than Big 5 Sporting. It trades about 0.04 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.11 per unit of risk. If you would invest 57.00 in Aluminum of on August 29, 2024 and sell it today you would earn a total of 1.00 from holding Aluminum of or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Big 5 Sporting
Performance |
| Timeline |
| Aluminumof China |
| Big 5 Sporting |
Aluminumof China and Big 5 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Big 5
The main advantage of trading using opposite Aluminumof China and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.| Aluminumof China vs. SCANSOURCE | Aluminumof China vs. CITY OFFICE REIT | Aluminumof China vs. Tencent Music Entertainment | Aluminumof China vs. ZINC MEDIA GR |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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