Correlation Between Aluminumof China and Iwatani

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

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

Diversification Opportunities for Aluminumof China and Iwatani

0.29

Correlation Coefficient

Aluminumof China  Iwatani

Modest diversification

The 3 months correlation between Aluminumof and Iwatani is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Iwatani in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iwatani and Aluminumof China 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 Aluminum of are associated (or correlated) with Iwatani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iwatani has no effect on the direction of Aluminumof China i.e., Aluminumof China and Iwatani go up and down completely randomly.

Pair Corralation between Aluminumof China and Iwatani

Assuming the 90 days horizon Aluminum of is expected to generate 2.79 times more return on investment than Iwatani. However, Aluminumof China is 2.79 times more volatile than Iwatani. It trades about 0.06 of its potential returns per unit of risk. Iwatani is currently generating about -0.19 per unit of risk. If you would invest  48.00  in Aluminum of on September 22, 2024 and sell it today you would earn a total of  6.00  from holding Aluminum of or generate 12.5% return on investment over 90 days.

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

Aluminum of  vs.  Iwatani

Aluminumof China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 5 (%) 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.

Iwatani

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iwatani has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aluminumof China and Iwatani

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

The idea behind Aluminum of and Iwatani 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.