Correlation Between China Aluminum and Gem Year

Can any of the company-specific risk be diversified away by investing in both China Aluminum and Gem Year 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 Gem Year 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 Gem Year Industrial Co, you can compare the effects of market volatilities on China Aluminum and Gem Year 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 Gem Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aluminum and Gem Year.

Diversification Opportunities for China Aluminum and Gem Year

0.81

Correlation Coefficient

China Aluminum  Gem Year

Very poor diversification

The 3 months correlation between China and Gem is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Aluminum International and Gem Year Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gem Year Industrial 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 Gem Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gem Year Industrial has no effect on the direction of China Aluminum i.e., China Aluminum and Gem Year go up and down completely randomly.

Pair Corralation between China Aluminum and Gem Year

Assuming the 90 days trading horizon China Aluminum is expected to generate 1.87 times less return on investment than Gem Year. But when comparing it to its historical volatility, China Aluminum International is 1.14 times less risky than Gem Year. It trades about 0.14 of its potential returns per unit of risk. Gem Year Industrial Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Gem Year Industrial Co on September 20, 2024 and sell it today you would earn a total of  148.00  from holding Gem Year Industrial Co or generate 48.68% return on investment over 90 days.

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

China Aluminum International  vs.  Gem Year Industrial Co

China Aluminum Inter

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Aluminum International are ranked lower than 10 (%) 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.

Gem Year Industrial

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with China Aluminum and Gem Year

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

The idea behind China Aluminum International and Gem Year Industrial Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.