Correlation Between Yunnan Aluminium and Changchun

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

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

Diversification Opportunities for Yunnan Aluminium and Changchun

0.29

Correlation Coefficient

Yunnan Aluminium  Changchun

Modest diversification

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

Pair Corralation between Yunnan Aluminium and Changchun

Assuming the 90 days trading horizon Yunnan Aluminium Co is expected to generate 1.09 times more return on investment than Changchun. However, Yunnan Aluminium is 1.09 times more volatile than Changchun UP Optotech. It trades about 0.11 of its potential returns per unit of risk. Changchun UP Optotech is currently generating about -0.44 per unit of risk. If you would invest  1,384  in Yunnan Aluminium Co on October 8, 2024 and sell it today you would earn a total of  69.00  from holding Yunnan Aluminium Co or generate 4.99% return on investment over 90 days.

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

Yunnan Aluminium Co  vs.  Changchun UP Optotech

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.

Changchun UP Optotech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Changchun is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yunnan Aluminium and Changchun

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

The idea behind Yunnan Aluminium Co and Changchun UP Optotech 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.