Correlation Between Jiugui Liquor and Yunnan Aluminium

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

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

Diversification Opportunities for Jiugui Liquor and Yunnan Aluminium

0.48

Correlation Coefficient

Jiugui Liquor  Yunnan Aluminium

Very weak diversification

The 3 months correlation between Jiugui and Yunnan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Jiugui Liquor Co and Yunnan Aluminium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yunnan Aluminium and Jiugui Liquor 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 Jiugui Liquor Co 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 Jiugui Liquor i.e., Jiugui Liquor and Yunnan Aluminium go up and down completely randomly.

Pair Corralation between Jiugui Liquor and Yunnan Aluminium

Assuming the 90 days trading horizon Jiugui Liquor Co is expected to under-perform the Yunnan Aluminium. In addition to that, Jiugui Liquor is 1.09 times more volatile than Yunnan Aluminium Co. It trades about -0.06 of its total potential returns per unit of risk. Yunnan Aluminium Co is currently generating about 0.03 per unit of volatility. If you would invest  1,101  in Yunnan Aluminium Co on September 30, 2024 and sell it today you would earn a total of  274.00  from holding Yunnan Aluminium Co or generate 24.89% return on investment over 90 days.

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

Jiugui Liquor Co  vs.  Yunnan Aluminium Co

Jiugui Liquor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiugui Liquor Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiugui Liquor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 somewhat strong basic indicators, Yunnan Aluminium is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jiugui Liquor and Yunnan Aluminium

The main advantage of trading using opposite Jiugui Liquor and Yunnan Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jiugui Liquor 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 Jiugui Liquor Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.