Correlation Between Daito Trust and Aluminumof China

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Can any of the company-specific risk be diversified away by investing in both Daito Trust 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 Daito Trust and Aluminumof China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daito Trust Construction and Aluminum of, you can compare the effects of market volatilities on Daito Trust 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 Daito Trust with a short position of Aluminumof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and Aluminumof China.

Diversification Opportunities for Daito Trust and Aluminumof China

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Daito and Aluminumof is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China and Daito Trust 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 Daito Trust Construction 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 Daito Trust i.e., Daito Trust and Aluminumof China go up and down completely randomly.

Pair Corralation between Daito Trust and Aluminumof China

Assuming the 90 days horizon Daito Trust is expected to generate 48.33 times less return on investment than Aluminumof China. But when comparing it to its historical volatility, Daito Trust Construction is 3.43 times less risky than Aluminumof China. It trades about 0.01 of its potential returns per unit of risk. Aluminum of is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Aluminum of on September 18, 2024 and sell it today you would earn a total of  9.00  from holding Aluminum of or generate 20.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Daito Trust Construction  vs.  Aluminum of

 Performance 
       Timeline  
Daito Trust Construction 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Daito Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Aluminumof China 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

Daito Trust and Aluminumof China Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Daito Trust and Aluminumof China

The main advantage of trading using opposite Daito Trust and Aluminumof China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust 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.
The idea behind Daito Trust Construction and Aluminum of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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