Correlation Between Tianshan Aluminum and Hainan Pearl

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

By analyzing existing cross correlation between Tianshan Aluminum Group and Hainan Pearl River, you can compare the effects of market volatilities on Tianshan Aluminum and Hainan Pearl 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 Tianshan Aluminum with a short position of Hainan Pearl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianshan Aluminum and Hainan Pearl.

Diversification Opportunities for Tianshan Aluminum and Hainan Pearl

0.32

Correlation Coefficient

Tianshan Aluminum  Hainan Pearl

Weak diversification

The 3 months correlation between Tianshan and Hainan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tianshan Aluminum Group and Hainan Pearl River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Pearl River and Tianshan Aluminum 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 Tianshan Aluminum Group are associated (or correlated) with Hainan Pearl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Pearl River has no effect on the direction of Tianshan Aluminum i.e., Tianshan Aluminum and Hainan Pearl go up and down completely randomly.

Pair Corralation between Tianshan Aluminum and Hainan Pearl

Assuming the 90 days trading horizon Tianshan Aluminum Group is expected to generate 0.66 times more return on investment than Hainan Pearl. However, Tianshan Aluminum Group is 1.51 times less risky than Hainan Pearl. It trades about -0.07 of its potential returns per unit of risk. Hainan Pearl River is currently generating about -0.37 per unit of risk. If you would invest  820.00  in Tianshan Aluminum Group on October 11, 2024 and sell it today you would lose (20.00) from holding Tianshan Aluminum Group or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Tianshan Aluminum Group  vs.  Hainan Pearl River

Tianshan Aluminum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshan Aluminum Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tianshan Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hainan Pearl River

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hainan Pearl River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tianshan Aluminum and Hainan Pearl

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

The idea behind Tianshan Aluminum Group and Hainan Pearl River 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.