Correlation Between China Hongqiao and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both China Hongqiao and Kaiser 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 Kaiser 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 Kaiser Aluminum, you can compare the effects of market volatilities on China Hongqiao and Kaiser 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Hongqiao and Kaiser Aluminum.
Diversification Opportunities for China Hongqiao and Kaiser Aluminum
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Kaiser is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of China Hongqiao i.e., China Hongqiao and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between China Hongqiao and Kaiser Aluminum
Assuming the 90 days horizon China Hongqiao Group is expected to generate 2.81 times more return on investment than Kaiser Aluminum. However, China Hongqiao is 2.81 times more volatile than Kaiser Aluminum. It trades about 0.15 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.03 per unit of risk. If you would invest 72.00 in China Hongqiao Group on November 2, 2024 and sell it today you would earn a total of 94.00 from holding China Hongqiao Group or generate 130.56% 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. Kaiser Aluminum
Performance |
| Timeline |
| China Hongqiao Group |
| Kaiser Aluminum |
China Hongqiao and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Hongqiao and Kaiser Aluminum
The main advantage of trading using opposite China Hongqiao and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Hongqiao position performs unexpectedly, Kaiser 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| China Hongqiao vs. Kaiser Aluminum | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Constellium Nv | China Hongqiao vs. Alcoa Corp |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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