Correlation Between SIERRA METALS and Aluminumof China
Can any of the company-specific risk be diversified away by investing in both SIERRA METALS and Aluminumof China 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 SIERRA METALS and Aluminumof China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SIERRA METALS and Aluminum of, you can compare the effects of market volatilities on SIERRA METALS and Aluminumof China 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 SIERRA METALS with a short position of Aluminumof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIERRA METALS and Aluminumof China.
Diversification Opportunities for SIERRA METALS and Aluminumof China
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SIERRA and Aluminumof is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China and SIERRA METALS 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 SIERRA METALS are associated (or correlated) with Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of SIERRA METALS i.e., SIERRA METALS and Aluminumof China go up and down completely randomly.
Pair Corralation between SIERRA METALS and Aluminumof China
Assuming the 90 days trading horizon SIERRA METALS is expected to generate 1.07 times more return on investment than Aluminumof China. However, SIERRA METALS is 1.07 times more volatile than Aluminum of. It trades about -0.01 of its potential returns per unit of risk. Aluminum of is currently generating about -0.01 per unit of risk. If you would invest 56.00 in SIERRA METALS on October 9, 2024 and sell it today you would lose (2.00) from holding SIERRA METALS or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SIERRA METALS vs. Aluminum of
Performance |
| Timeline |
| SIERRA METALS |
| Aluminumof China |
SIERRA METALS and Aluminumof China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SIERRA METALS and Aluminumof China
The main advantage of trading using opposite SIERRA METALS and Aluminumof China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIERRA METALS position performs unexpectedly, Aluminumof China 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 Aluminumof China will offset losses from the drop in Aluminumof China's long position.| SIERRA METALS vs. Apple Inc | SIERRA METALS vs. Apple Inc | SIERRA METALS vs. Apple Inc | SIERRA METALS vs. Apple Inc |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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