Correlation Between Rising Nonferrous and Chongqing Shunbo

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

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

Diversification Opportunities for Rising Nonferrous and Chongqing Shunbo

0.93

Correlation Coefficient

Rising Nonferrous  Chongqing Shunbo

Almost no diversification

The 3 months correlation between Rising and Chongqing is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Rising Nonferrous Metals and Chongqing Shunbo Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Shunbo Aluminum and Rising Nonferrous 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 Rising Nonferrous Metals are associated (or correlated) with Chongqing Shunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Shunbo Aluminum has no effect on the direction of Rising Nonferrous i.e., Rising Nonferrous and Chongqing Shunbo go up and down completely randomly.

Pair Corralation between Rising Nonferrous and Chongqing Shunbo

Assuming the 90 days trading horizon Rising Nonferrous is expected to generate 1.38 times less return on investment than Chongqing Shunbo. In addition to that, Rising Nonferrous is 1.1 times more volatile than Chongqing Shunbo Aluminum. It trades about 0.15 of its total potential returns per unit of risk. Chongqing Shunbo Aluminum is currently generating about 0.22 per unit of volatility. If you would invest  490.00  in Chongqing Shunbo Aluminum on September 13, 2024 and sell it today you would earn a total of  210.00  from holding Chongqing Shunbo Aluminum or generate 42.86% return on investment over 90 days.

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

Rising Nonferrous Metals  vs.  Chongqing Shunbo Aluminum

Rising Nonferrous Metals

Risk-Adjusted Performance

11 of 100

OK

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

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Shunbo sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rising Nonferrous and Chongqing Shunbo

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

The idea behind Rising Nonferrous Metals and Chongqing Shunbo 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.