Correlation Between Yunnan Aluminium and HeBei Jinniu

Can any of the company-specific risk be diversified away by investing in both Yunnan Aluminium and HeBei Jinniu 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 HeBei Jinniu 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 HeBei Jinniu Chemical, you can compare the effects of market volatilities on Yunnan Aluminium and HeBei Jinniu 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 HeBei Jinniu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yunnan Aluminium and HeBei Jinniu.

Diversification Opportunities for Yunnan Aluminium and HeBei Jinniu

0.46

Correlation Coefficient

Yunnan Aluminium  HeBei Jinniu

Very weak diversification

The 3 months correlation between Yunnan and HeBei is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Yunnan Aluminium Co and HeBei Jinniu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeBei Jinniu Chemical 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 HeBei Jinniu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeBei Jinniu Chemical has no effect on the direction of Yunnan Aluminium i.e., Yunnan Aluminium and HeBei Jinniu go up and down completely randomly.

Pair Corralation between Yunnan Aluminium and HeBei Jinniu

Assuming the 90 days trading horizon Yunnan Aluminium Co is expected to generate 0.59 times more return on investment than HeBei Jinniu. However, Yunnan Aluminium Co is 1.69 times less risky than HeBei Jinniu. It trades about 0.14 of its potential returns per unit of risk. HeBei Jinniu Chemical is currently generating about 0.0 per unit of risk. If you would invest  1,376  in Yunnan Aluminium Co on December 1, 2024 and sell it today you would earn a total of  234.00  from holding Yunnan Aluminium Co or generate 17.01% return on investment over 90 days.

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

Yunnan Aluminium Co  vs.  HeBei Jinniu Chemical

Yunnan Aluminium

Risk-Adjusted Performance

Good

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

HeBei Jinniu Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days HeBei Jinniu Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HeBei Jinniu 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 HeBei Jinniu

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

The idea behind Yunnan Aluminium Co and HeBei Jinniu Chemical 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.