Correlation Between Tianshan Aluminum and Suzhou Longway

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

Diversification Opportunities for Tianshan Aluminum and Suzhou Longway

-0.28

Correlation Coefficient

Tianshan Aluminum  Suzhou Longway

Very good diversification

The 3 months correlation between Tianshan and Suzhou is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tianshan Aluminum Group and Suzhou Longway Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou Longway Electronic 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 Suzhou Longway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou Longway Electronic has no effect on the direction of Tianshan Aluminum i.e., Tianshan Aluminum and Suzhou Longway go up and down completely randomly.

Pair Corralation between Tianshan Aluminum and Suzhou Longway

Assuming the 90 days trading horizon Tianshan Aluminum is expected to generate 1.43 times less return on investment than Suzhou Longway. But when comparing it to its historical volatility, Tianshan Aluminum Group is 2.35 times less risky than Suzhou Longway. It trades about 0.05 of its potential returns per unit of risk. Suzhou Longway Electronic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,443  in Suzhou Longway Electronic on October 23, 2024 and sell it today you would earn a total of  47.00  from holding Suzhou Longway Electronic or generate 1.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Tianshan Aluminum Group  vs.  Suzhou Longway Electronic

Tianshan Aluminum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshan Aluminum Group are ranked lower than 3 (%) 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.

Suzhou Longway Electronic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suzhou Longway Electronic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Suzhou Longway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tianshan Aluminum and Suzhou Longway

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

The idea behind Tianshan Aluminum Group and Suzhou Longway Electronic 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.