Correlation Between China Aluminum and Cultural Investment

Can any of the company-specific risk be diversified away by investing in both China Aluminum and Cultural Investment 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 Aluminum and Cultural Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Aluminum International and Cultural Investment Holdings, you can compare the effects of market volatilities on China Aluminum and Cultural Investment 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 Aluminum with a short position of Cultural Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aluminum and Cultural Investment.

Diversification Opportunities for China Aluminum and Cultural Investment

0.74

Correlation Coefficient

China Aluminum  Cultural Investment

Poor diversification

The 3 months correlation between China and Cultural is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding China Aluminum International and Cultural Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cultural Investment and China Aluminum 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 Aluminum International are associated (or correlated) with Cultural Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cultural Investment has no effect on the direction of China Aluminum i.e., China Aluminum and Cultural Investment go up and down completely randomly.

Pair Corralation between China Aluminum and Cultural Investment

Assuming the 90 days trading horizon China Aluminum International is expected to generate 0.9 times more return on investment than Cultural Investment. However, China Aluminum International is 1.12 times less risky than Cultural Investment. It trades about 0.15 of its potential returns per unit of risk. Cultural Investment Holdings is currently generating about 0.11 per unit of risk. If you would invest  381.00  in China Aluminum International on September 3, 2024 and sell it today you would earn a total of  93.00  from holding China Aluminum International or generate 24.41% return on investment over 90 days.

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

China Aluminum International  vs.  Cultural Investment Holdings

China Aluminum Inter

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Aluminum International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Aluminum sustained solid returns over the last few months and may actually be approaching a breakup point.

Cultural Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cultural Investment Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cultural Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Aluminum and Cultural Investment

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

The idea behind China Aluminum International and Cultural Investment Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.