Correlation Between China Aluminum and Ping An

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

Diversification Opportunities for China Aluminum and Ping An

0.78

Correlation Coefficient

China Aluminum  Ping An

Poor diversification

The 3 months correlation between China and Ping is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding China Aluminum International and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of China Aluminum i.e., China Aluminum and Ping An go up and down completely randomly.

Pair Corralation between China Aluminum and Ping An

Assuming the 90 days trading horizon China Aluminum International is expected to under-perform the Ping An. In addition to that, China Aluminum is 1.33 times more volatile than Ping An Insurance. It trades about -0.53 of its total potential returns per unit of risk. Ping An Insurance is currently generating about -0.45 per unit of volatility. If you would invest  5,558  in Ping An Insurance on October 13, 2024 and sell it today you would lose (663.00) from holding Ping An Insurance or give up 11.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

China Aluminum International  vs.  Ping An Insurance

China Aluminum Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aluminum International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ping An Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ping An Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Aluminum and Ping An

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

The idea behind China Aluminum International and Ping An Insurance 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.