Correlation Between China Hongqiao and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both China Hongqiao and Century Aluminum 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 Century Aluminum 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 Century Aluminum, you can compare the effects of market volatilities on China Hongqiao and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Hongqiao and Century Aluminum.
Diversification Opportunities for China Hongqiao and Century Aluminum
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Century is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of China Hongqiao i.e., China Hongqiao and Century Aluminum go up and down completely randomly.
Pair Corralation between China Hongqiao and Century Aluminum
Assuming the 90 days horizon China Hongqiao Group is expected to under-perform the Century Aluminum. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Hongqiao Group is 6.54 times less risky than Century Aluminum. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Century Aluminum is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,073 in Century Aluminum on November 18, 2024 and sell it today you would earn a total of 21.00 from holding Century Aluminum or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Hongqiao Group vs. Century Aluminum
Performance |
| Timeline |
| China Hongqiao Group |
| Century Aluminum |
China Hongqiao and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Hongqiao and Century Aluminum
The main advantage of trading using opposite China Hongqiao and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| China Hongqiao vs. Kaiser Aluminum | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Constellium Nv | China Hongqiao vs. Alcoa Corp |
| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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