Correlation Between Tianshan Aluminum and Guangdong Jingyi

Can any of the company-specific risk be diversified away by investing in both Tianshan Aluminum and Guangdong Jingyi 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 Guangdong Jingyi 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 Guangdong Jingyi Metal, you can compare the effects of market volatilities on Tianshan Aluminum and Guangdong Jingyi 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 Guangdong Jingyi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianshan Aluminum and Guangdong Jingyi.

Diversification Opportunities for Tianshan Aluminum and Guangdong Jingyi

0.79

Correlation Coefficient

Tianshan Aluminum  Guangdong Jingyi

Poor diversification

The 3 months correlation between Tianshan and Guangdong is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tianshan Aluminum Group and Guangdong Jingyi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jingyi Metal 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 Guangdong Jingyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jingyi Metal has no effect on the direction of Tianshan Aluminum i.e., Tianshan Aluminum and Guangdong Jingyi go up and down completely randomly.

Pair Corralation between Tianshan Aluminum and Guangdong Jingyi

Assuming the 90 days trading horizon Tianshan Aluminum is expected to generate 1.36 times less return on investment than Guangdong Jingyi. In addition to that, Tianshan Aluminum is 1.11 times more volatile than Guangdong Jingyi Metal. It trades about 0.2 of its total potential returns per unit of risk. Guangdong Jingyi Metal is currently generating about 0.3 per unit of volatility. If you would invest  487.00  in Guangdong Jingyi Metal on September 13, 2024 and sell it today you would earn a total of  286.00  from holding Guangdong Jingyi Metal or generate 58.73% return on investment over 90 days.

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

Tianshan Aluminum Group  vs.  Guangdong Jingyi Metal

Tianshan Aluminum

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshan Aluminum Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshan Aluminum sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Jingyi Metal

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jingyi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianshan Aluminum and Guangdong Jingyi

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

The idea behind Tianshan Aluminum Group and Guangdong Jingyi 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.