Correlation Between TOPMATERIAL and Choil Aluminum

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

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

Diversification Opportunities for TOPMATERIAL and Choil Aluminum

0.56

Correlation Coefficient

TOPMATERIAL  Choil Aluminum

Very weak diversification

The 3 months correlation between TOPMATERIAL and Choil is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Choil Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choil Aluminum and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Choil Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choil Aluminum has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Choil Aluminum go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Choil Aluminum

Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to generate 2.42 times more return on investment than Choil Aluminum. However, TOPMATERIAL is 2.42 times more volatile than Choil Aluminum. It trades about 0.08 of its potential returns per unit of risk. Choil Aluminum is currently generating about 0.08 per unit of risk. If you would invest  2,735,000  in TOPMATERIAL LTD on December 4, 2024 and sell it today you would earn a total of  560,000  from holding TOPMATERIAL LTD or generate 20.48% return on investment over 90 days.

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

TOPMATERIAL LTD  vs.  Choil Aluminum

TOPMATERIAL LTD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TOPMATERIAL LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TOPMATERIAL sustained solid returns over the last few months and may actually be approaching a breakup point.

Choil Aluminum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Choil Aluminum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Choil Aluminum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TOPMATERIAL and Choil Aluminum

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

The idea behind TOPMATERIAL LTD and Choil Aluminum 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.