Correlation Between Tianshan Aluminum and Industrial

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

Diversification Opportunities for Tianshan Aluminum and Industrial

0.81

Correlation Coefficient

Tianshan Aluminum  Industrial

Very poor diversification

The 3 months correlation between Tianshan and Industrial is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tianshan Aluminum Group and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Tianshan Aluminum i.e., Tianshan Aluminum and Industrial go up and down completely randomly.

Pair Corralation between Tianshan Aluminum and Industrial

Assuming the 90 days trading horizon Tianshan Aluminum Group is expected to generate 2.07 times more return on investment than Industrial. However, Tianshan Aluminum is 2.07 times more volatile than Industrial and Commercial. It trades about 0.19 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.15 per unit of risk. If you would invest  616.00  in Tianshan Aluminum Group on September 14, 2024 and sell it today you would earn a total of  227.00  from holding Tianshan Aluminum Group or generate 36.85% return on investment over 90 days.

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

Tianshan Aluminum Group  vs.  Industrial and Commercial

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.

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianshan Aluminum and Industrial

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

The idea behind Tianshan Aluminum Group and Industrial and Commercial 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.