Correlation Between Tianshan Aluminum and Zhejiang Orient

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

Diversification Opportunities for Tianshan Aluminum and Zhejiang Orient

0.44

Correlation Coefficient

Tianshan Aluminum  Zhejiang Orient

Very weak diversification

The 3 months correlation between Tianshan and Zhejiang is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tianshan Aluminum Group and Zhejiang Orient Gene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Orient Gene 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 Zhejiang Orient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Orient Gene has no effect on the direction of Tianshan Aluminum i.e., Tianshan Aluminum and Zhejiang Orient go up and down completely randomly.

Pair Corralation between Tianshan Aluminum and Zhejiang Orient

Assuming the 90 days trading horizon Tianshan Aluminum Group is expected to generate 0.68 times more return on investment than Zhejiang Orient. However, Tianshan Aluminum Group is 1.47 times less risky than Zhejiang Orient. It trades about -0.16 of its potential returns per unit of risk. Zhejiang Orient Gene is currently generating about -0.14 per unit of risk. If you would invest  901.00  in Tianshan Aluminum Group on October 9, 2024 and sell it today you would lose (109.00) from holding Tianshan Aluminum Group or give up 12.1% of portfolio value over 90 days.

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

Tianshan Aluminum Group  vs.  Zhejiang Orient Gene

Tianshan Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshan Aluminum Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshan Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhejiang Orient Gene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Orient Gene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tianshan Aluminum and Zhejiang Orient

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

The idea behind Tianshan Aluminum Group and Zhejiang Orient Gene 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.