Correlation Between CICC Fund and China Aluminum

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

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

Diversification Opportunities for CICC Fund and China Aluminum

-0.14

Correlation Coefficient

CICC Fund  China Aluminum

Good diversification

The 3 months correlation between CICC and China is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CICC Fund Management and China Aluminum International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Aluminum Inter and CICC Fund 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 CICC Fund Management are associated (or correlated) with China Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Aluminum Inter has no effect on the direction of CICC Fund i.e., CICC Fund and China Aluminum go up and down completely randomly.

Pair Corralation between CICC Fund and China Aluminum

Assuming the 90 days trading horizon CICC Fund Management is expected to generate 0.44 times more return on investment than China Aluminum. However, CICC Fund Management is 2.27 times less risky than China Aluminum. It trades about 0.18 of its potential returns per unit of risk. China Aluminum International is currently generating about 0.05 per unit of risk. If you would invest  293.00  in CICC Fund Management on September 19, 2024 and sell it today you would earn a total of  72.00  from holding CICC Fund Management or generate 24.57% return on investment over 90 days.

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

CICC Fund Management  vs.  China Aluminum International

CICC Fund Management

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CICC Fund Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICC Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

China Aluminum Inter

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Aluminum International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Aluminum sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CICC Fund and China Aluminum

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

The idea behind CICC Fund Management and China Aluminum International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.