Correlation Between Rising Nonferrous and Yunnan Aluminium

Can any of the company-specific risk be diversified away by investing in both Rising Nonferrous and Yunnan Aluminium 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 Rising Nonferrous and Yunnan Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rising Nonferrous Metals and Yunnan Aluminium Co, you can compare the effects of market volatilities on Rising Nonferrous and Yunnan Aluminium 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 Rising Nonferrous with a short position of Yunnan Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rising Nonferrous and Yunnan Aluminium.

Diversification Opportunities for Rising Nonferrous and Yunnan Aluminium

0.65

Correlation Coefficient

Rising Nonferrous  Yunnan Aluminium

Poor diversification

The 3 months correlation between Rising and Yunnan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rising Nonferrous Metals and Yunnan Aluminium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Aluminium and Rising Nonferrous 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 Rising Nonferrous Metals are associated (or correlated) with Yunnan Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yunnan Aluminium has no effect on the direction of Rising Nonferrous i.e., Rising Nonferrous and Yunnan Aluminium go up and down completely randomly.

Pair Corralation between Rising Nonferrous and Yunnan Aluminium

Assuming the 90 days trading horizon Rising Nonferrous Metals is expected to under-perform the Yunnan Aluminium. But the stock apears to be less risky and, when comparing its historical volatility, Rising Nonferrous Metals is 1.9 times less risky than Yunnan Aluminium. The stock trades about -0.41 of its potential returns per unit of risk. The Yunnan Aluminium Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,376  in Yunnan Aluminium Co on October 1, 2024 and sell it today you would lose (1.00) from holding Yunnan Aluminium Co or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Rising Nonferrous Metals  vs.  Yunnan Aluminium Co

Rising Nonferrous Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rising Nonferrous Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Yunnan Aluminium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yunnan Aluminium Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rising Nonferrous and Yunnan Aluminium

The main advantage of trading using opposite Rising Nonferrous and Yunnan Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Nonferrous position performs unexpectedly, Yunnan Aluminium 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 Yunnan Aluminium will offset losses from the drop in Yunnan Aluminium's long position.

The idea behind Rising Nonferrous Metals and Yunnan Aluminium Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.