Correlation Between Xinjiang Tianrun and China Aluminum

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

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

Diversification Opportunities for Xinjiang Tianrun and China Aluminum

0.7

Correlation Coefficient

Xinjiang Tianrun  China Aluminum

Poor diversification

The 3 months correlation between Xinjiang and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Tianrun Dairy 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 Xinjiang Tianrun 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 Xinjiang Tianrun Dairy 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 Xinjiang Tianrun i.e., Xinjiang Tianrun and China Aluminum go up and down completely randomly.

Pair Corralation between Xinjiang Tianrun and China Aluminum

Assuming the 90 days trading horizon Xinjiang Tianrun Dairy is expected to generate 1.95 times more return on investment than China Aluminum. However, Xinjiang Tianrun is 1.95 times more volatile than China Aluminum International. It trades about 0.06 of its potential returns per unit of risk. China Aluminum International is currently generating about 0.02 per unit of risk. If you would invest  951.00  in Xinjiang Tianrun Dairy on December 25, 2024 and sell it today you would earn a total of  68.00  from holding Xinjiang Tianrun Dairy or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Xinjiang Tianrun Dairy  vs.  China Aluminum International

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

Insignificant

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

China Aluminum Inter

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Aluminum International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xinjiang Tianrun and China Aluminum

The main advantage of trading using opposite Xinjiang Tianrun and China Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xinjiang Tianrun 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 Xinjiang Tianrun Dairy 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.