Correlation Between China Hongqiao and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both China Hongqiao and Alcoa Corp 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 China Hongqiao and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Hongqiao Group and Alcoa Corp, you can compare the effects of market volatilities on China Hongqiao and Alcoa Corp 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 China Hongqiao with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Hongqiao and Alcoa Corp.
Diversification Opportunities for China Hongqiao and Alcoa Corp
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Alcoa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and China Hongqiao 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 China Hongqiao Group are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of China Hongqiao i.e., China Hongqiao and Alcoa Corp go up and down completely randomly.
Pair Corralation between China Hongqiao and Alcoa Corp
Assuming the 90 days horizon China Hongqiao Group is expected to generate 3.48 times more return on investment than Alcoa Corp. However, China Hongqiao is 3.48 times more volatile than Alcoa Corp. It trades about 0.23 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.17 per unit of risk. If you would invest 107.00 in China Hongqiao Group on August 23, 2024 and sell it today you would earn a total of 59.00 from holding China Hongqiao Group or generate 55.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Hongqiao Group vs. Alcoa Corp
Performance |
| Timeline |
| China Hongqiao Group |
| Alcoa Corp |
China Hongqiao and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Hongqiao and Alcoa Corp
The main advantage of trading using opposite China Hongqiao and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| China Hongqiao vs. Kaiser Aluminum | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Constellium Nv | China Hongqiao vs. Alcoa Corp |
| Alcoa Corp vs. Small Cap Core | Alcoa Corp vs. Morningstar Unconstrained Allocation | Alcoa Corp vs. Mutual Of America | Alcoa Corp vs. Ep Emerging Markets |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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