Correlation Between China Aluminum and Guangzhou KingTeller

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

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

Diversification Opportunities for China Aluminum and Guangzhou KingTeller

0.79

Correlation Coefficient

China Aluminum  Guangzhou KingTeller

Poor diversification

The 3 months correlation between China and Guangzhou is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding China Aluminum International and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller and China 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 China Aluminum International are associated (or correlated) with Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of China Aluminum i.e., China Aluminum and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between China Aluminum and Guangzhou KingTeller

Assuming the 90 days trading horizon China Aluminum International is expected to generate 0.44 times more return on investment than Guangzhou KingTeller. However, China Aluminum International is 2.3 times less risky than Guangzhou KingTeller. It trades about 0.02 of its potential returns per unit of risk. Guangzhou KingTeller Technology is currently generating about 0.0 per unit of risk. If you would invest  449.00  in China Aluminum International on December 25, 2024 and sell it today you would earn a total of  6.00  from holding China Aluminum International or generate 1.34% return on investment over 90 days.

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

China Aluminum International  vs.  Guangzhou KingTeller Technolog

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.

Guangzhou KingTeller

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou KingTeller Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou KingTeller is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Aluminum and Guangzhou KingTeller

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

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