Correlation Between China Aluminum and Ye Chiu

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

Diversification Opportunities for China Aluminum and Ye Chiu

0.8

Correlation Coefficient

China Aluminum  Ye Chiu

Very poor diversification

The 3 months correlation between China and 601388 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding China Aluminum International and Ye Chiu Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ye Chiu Metal 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 Ye Chiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ye Chiu Metal has no effect on the direction of China Aluminum i.e., China Aluminum and Ye Chiu go up and down completely randomly.

Pair Corralation between China Aluminum and Ye Chiu

Assuming the 90 days trading horizon China Aluminum International is expected to generate 0.78 times more return on investment than Ye Chiu. However, China Aluminum International is 1.28 times less risky than Ye Chiu. It trades about -0.12 of its potential returns per unit of risk. Ye Chiu Metal is currently generating about -0.1 per unit of risk. If you would invest  489.00  in China Aluminum International on December 2, 2024 and sell it today you would lose (55.00) from holding China Aluminum International or give up 11.25% of portfolio value over 90 days.

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

China Aluminum International  vs.  Ye Chiu Metal

China Aluminum Inter

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ye Chiu Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ye Chiu Metal 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Aluminum and Ye Chiu

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

The idea behind China Aluminum International and Ye Chiu Metal 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.