Correlation Between Aluminumof China and Loblaw Companies
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Loblaw Companies 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 Loblaw Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Loblaw Companies Limited, you can compare the effects of market volatilities on Aluminumof China and Loblaw Companies 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 Loblaw Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Loblaw Companies.
Diversification Opportunities for Aluminumof China and Loblaw Companies
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aluminumof and Loblaw is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Loblaw Companies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loblaw Companies 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 Loblaw Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loblaw Companies has no effect on the direction of Aluminumof China i.e., Aluminumof China and Loblaw Companies go up and down completely randomly.
Pair Corralation between Aluminumof China and Loblaw Companies
Assuming the 90 days horizon Aluminum of is expected to generate 3.22 times more return on investment than Loblaw Companies. However, Aluminumof China is 3.22 times more volatile than Loblaw Companies Limited. It trades about 0.08 of its potential returns per unit of risk. Loblaw Companies Limited is currently generating about 0.05 per unit of risk. If you would invest 50.00 in Aluminum of on August 25, 2024 and sell it today you would earn a total of 7.00 from holding Aluminum of or generate 14.0% 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. Loblaw Companies Limited
Performance |
| Timeline |
| Aluminumof China |
| Loblaw Companies |
Aluminumof China and Loblaw Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Loblaw Companies
The main advantage of trading using opposite Aluminumof China and Loblaw Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Loblaw Companies 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 Loblaw Companies will offset losses from the drop in Loblaw Companies' long position.| Aluminumof China vs. Materialise NV | Aluminumof China vs. Air Transport Services | Aluminumof China vs. Martin Marietta Materials | Aluminumof China vs. Summit Materials |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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