Correlation Between De Rucci and China Nonferrous

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

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

Diversification Opportunities for De Rucci and China Nonferrous

0.72

Correlation Coefficient

De Rucci  China Nonferrous

Poor diversification

The 3 months correlation between 001323 and China is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding De Rucci Healthy and China Nonferrous Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Nonferrous Metal and De Rucci 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 De Rucci Healthy are associated (or correlated) with China Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Nonferrous Metal has no effect on the direction of De Rucci i.e., De Rucci and China Nonferrous go up and down completely randomly.

Pair Corralation between De Rucci and China Nonferrous

Assuming the 90 days trading horizon De Rucci Healthy is expected to generate 0.87 times more return on investment than China Nonferrous. However, De Rucci Healthy is 1.15 times less risky than China Nonferrous. It trades about 0.13 of its potential returns per unit of risk. China Nonferrous Metal is currently generating about -0.01 per unit of risk. If you would invest  2,748  in De Rucci Healthy on October 4, 2024 and sell it today you would earn a total of  1,033  from holding De Rucci Healthy or generate 37.59% return on investment over 90 days.

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

De Rucci Healthy  vs.  China Nonferrous Metal

De Rucci Healthy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Rucci Healthy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, De Rucci sustained solid returns over the last few months and may actually be approaching a breakup point.

China Nonferrous Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Nonferrous Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Nonferrous is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with De Rucci and China Nonferrous

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

The idea behind De Rucci Healthy and China Nonferrous Metal 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.