Correlation Between Aluminumof China and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and MGP Ingredients 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 MGP Ingredients into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and MGP Ingredients, you can compare the effects of market volatilities on Aluminumof China and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and MGP Ingredients.
Diversification Opportunities for Aluminumof China and MGP Ingredients
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aluminumof and MGP is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Aluminumof China i.e., Aluminumof China and MGP Ingredients go up and down completely randomly.
Pair Corralation between Aluminumof China and MGP Ingredients
Assuming the 90 days horizon Aluminum of is expected to generate 1.3 times more return on investment than MGP Ingredients. However, Aluminumof China is 1.3 times more volatile than MGP Ingredients. It trades about 0.23 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.38 per unit of risk. If you would invest 54.00 in Aluminum of on October 20, 2024 and sell it today you would earn a total of 7.00 from holding Aluminum of or generate 12.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Aluminum of vs. MGP Ingredients
Performance |
| Timeline |
| Aluminumof China |
| MGP Ingredients |
Aluminumof China and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and MGP Ingredients
The main advantage of trading using opposite Aluminumof China and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Aluminumof China vs. GBS Software AG | Aluminumof China vs. AGNC INVESTMENT | Aluminumof China vs. Kingdee International Software | Aluminumof China vs. SLR Investment Corp |
| MGP Ingredients vs. Hawesko Holding AG | MGP Ingredients vs. NAKED WINES PLC | MGP Ingredients vs. CHINA TONTINE WINES |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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