Correlation Between Aluminumof China and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Guangdong Investment 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 Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Guangdong Investment Limited, you can compare the effects of market volatilities on Aluminumof China and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Guangdong Investment.
Diversification Opportunities for Aluminumof China and Guangdong Investment
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aluminumof and Guangdong is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Aluminumof China i.e., Aluminumof China and Guangdong Investment go up and down completely randomly.
Pair Corralation between Aluminumof China and Guangdong Investment
Assuming the 90 days horizon Aluminum of is expected to generate 0.71 times more return on investment than Guangdong Investment. However, Aluminum of is 1.4 times less risky than Guangdong Investment. It trades about 0.19 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.1 per unit of risk. If you would invest 55.00 in Aluminum of on November 7, 2024 and sell it today you would earn a total of 6.00 from holding Aluminum of or generate 10.91% 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. Guangdong Investment Limited
Performance |
| Timeline |
| Aluminumof China |
| Guangdong Investment |
Aluminumof China and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Guangdong Investment
The main advantage of trading using opposite Aluminumof China and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| Aluminumof China vs. Altair Engineering | Aluminumof China vs. IMPERIAL TOBACCO | Aluminumof China vs. MTY Food Group | Aluminumof China vs. GWILLI FOOD |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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