Correlation Between Aluminumof China and Nippon Light
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Nippon Light 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 Nippon Light into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Nippon Light Metal, you can compare the effects of market volatilities on Aluminumof China and Nippon Light 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 Nippon Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Nippon Light.
Diversification Opportunities for Aluminumof China and Nippon Light
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aluminumof and Nippon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Nippon Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Light Metal 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 Nippon Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Light Metal has no effect on the direction of Aluminumof China i.e., Aluminumof China and Nippon Light go up and down completely randomly.
Pair Corralation between Aluminumof China and Nippon Light
Assuming the 90 days horizon Aluminum of is expected to generate 1.67 times more return on investment than Nippon Light. However, Aluminumof China is 1.67 times more volatile than Nippon Light Metal. It trades about 0.13 of its potential returns per unit of risk. Nippon Light Metal is currently generating about 0.12 per unit of risk. If you would invest 54.00 in Aluminum of on October 16, 2024 and sell it today you would earn a total of 3.00 from holding Aluminum of or generate 5.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.12% |
| Values | Daily Returns |
Aluminum of vs. Nippon Light Metal
Performance |
| Timeline |
| Aluminumof China |
| Nippon Light Metal |
Aluminumof China and Nippon Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Nippon Light
The main advantage of trading using opposite Aluminumof China and Nippon Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Nippon Light 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 Nippon Light will offset losses from the drop in Nippon Light's long position.| Aluminumof China vs. CarsalesCom | Aluminumof China vs. Gol Intelligent Airlines | Aluminumof China vs. Commercial Vehicle Group | Aluminumof China vs. CNVISION MEDIA |
| Nippon Light vs. alstria office REIT AG | Nippon Light vs. Dairy Farm International | Nippon Light vs. Hanison Construction Holdings | Nippon Light vs. MAGNUM MINING EXP |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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