Correlation Between Aluminumof China and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Treasury Wine 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 Treasury Wine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Treasury Wine Estates, you can compare the effects of market volatilities on Aluminumof China and Treasury Wine 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 Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Treasury Wine.
Diversification Opportunities for Aluminumof China and Treasury Wine
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aluminumof and Treasury is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Aluminumof China i.e., Aluminumof China and Treasury Wine go up and down completely randomly.
Pair Corralation between Aluminumof China and Treasury Wine
Assuming the 90 days horizon Aluminum of is expected to generate 2.5 times more return on investment than Treasury Wine. However, Aluminumof China is 2.5 times more volatile than Treasury Wine Estates. It trades about 0.12 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about 0.05 per unit of risk. If you would invest 51.00 in Aluminum of on September 1, 2024 and sell it today you would earn a total of 5.00 from holding Aluminum of or generate 9.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Treasury Wine Estates
Performance |
| Timeline |
| Aluminumof China |
| Treasury Wine Estates |
Aluminumof China and Treasury Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Treasury Wine
The main advantage of trading using opposite Aluminumof China and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Treasury Wine 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 Treasury Wine will offset losses from the drop in Treasury Wine's 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 |
| Treasury Wine vs. Pernod Ricard SA | Treasury Wine vs. Constellation Brands | Treasury Wine vs. Brown Forman | Treasury Wine vs. Thai Beverage Public |
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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