Correlation Between Westone Information and Aluminum Corp

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

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

Diversification Opportunities for Westone Information and Aluminum Corp

0.34

Correlation Coefficient

Westone Information  Aluminum Corp

Weak diversification

The 3 months correlation between Westone and Aluminum is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Westone Information Industry and Aluminum Corp of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum Corp and Westone Information 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 Westone Information Industry are associated (or correlated) with Aluminum Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum Corp has no effect on the direction of Westone Information i.e., Westone Information and Aluminum Corp go up and down completely randomly.

Pair Corralation between Westone Information and Aluminum Corp

Assuming the 90 days trading horizon Westone Information Industry is expected to generate 1.42 times more return on investment than Aluminum Corp. However, Westone Information is 1.42 times more volatile than Aluminum Corp of. It trades about 0.06 of its potential returns per unit of risk. Aluminum Corp of is currently generating about -0.29 per unit of risk. If you would invest  1,663  in Westone Information Industry on December 2, 2024 and sell it today you would earn a total of  37.00  from holding Westone Information Industry or generate 2.22% return on investment over 90 days.

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

Westone Information Industry  vs.  Aluminum Corp of

Westone Information

Risk-Adjusted Performance

Very Weak

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

Aluminum Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Westone Information and Aluminum Corp

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

The idea behind Westone Information Industry and Aluminum Corp of 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.