Correlation Between Aluminumof China and Cars
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Cars 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 Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Cars Inc, you can compare the effects of market volatilities on Aluminumof China and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Cars.
Diversification Opportunities for Aluminumof China and Cars
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aluminumof and Cars is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Aluminumof China i.e., Aluminumof China and Cars go up and down completely randomly.
Pair Corralation between Aluminumof China and Cars
Assuming the 90 days horizon Aluminumof China is expected to generate 2.21 times less return on investment than Cars. In addition to that, Aluminumof China is 1.43 times more volatile than Cars Inc. It trades about 0.12 of its total potential returns per unit of risk. Cars Inc is currently generating about 0.37 per unit of volatility. If you would invest 1,460 in Cars Inc on September 1, 2024 and sell it today you would earn a total of 400.00 from holding Cars Inc or generate 27.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Cars Inc
Performance |
| Timeline |
| Aluminumof China |
| Cars Inc |
Aluminumof China and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Cars
The main advantage of trading using opposite Aluminumof China and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Aluminumof China vs. PLAYTIKA HOLDING DL 01 | Aluminumof China vs. COSMOSTEEL HLDGS | Aluminumof China vs. Daido Steel Co | Aluminumof China vs. BLUESCOPE STEEL |
| Cars vs. Eastman Chemical | Cars vs. GRIFFIN MINING LTD | Cars vs. Shin Etsu Chemical Co | Cars vs. KINGBOARD CHEMICAL |
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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