Correlation Between Aluminum Corp and Guangdong Jinming

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

By analyzing existing cross correlation between Aluminum Corp of and Guangdong Jinming Machinery, you can compare the effects of market volatilities on Aluminum Corp and Guangdong Jinming 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 Aluminum Corp with a short position of Guangdong Jinming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum Corp and Guangdong Jinming.

Diversification Opportunities for Aluminum Corp and Guangdong Jinming

0.31

Correlation Coefficient

Aluminum Corp  Guangdong Jinming

Weak diversification

The 3 months correlation between Aluminum and Guangdong is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum Corp of and Guangdong Jinming Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Jinming and Aluminum Corp 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 Aluminum Corp of are associated (or correlated) with Guangdong Jinming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Jinming has no effect on the direction of Aluminum Corp i.e., Aluminum Corp and Guangdong Jinming go up and down completely randomly.

Pair Corralation between Aluminum Corp and Guangdong Jinming

Assuming the 90 days trading horizon Aluminum Corp of is expected to generate 0.69 times more return on investment than Guangdong Jinming. However, Aluminum Corp of is 1.45 times less risky than Guangdong Jinming. It trades about -0.05 of its potential returns per unit of risk. Guangdong Jinming Machinery is currently generating about -0.1 per unit of risk. If you would invest  759.00  in Aluminum Corp of on December 2, 2024 and sell it today you would lose (44.00) from holding Aluminum Corp of or give up 5.8% of portfolio value over 90 days.

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

Aluminum Corp of  vs.  Guangdong Jinming Machinery

Aluminum Corp

Risk-Adjusted Performance

Very Weak

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

Guangdong Jinming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Jinming Machinery 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 Aluminum Corp and Guangdong Jinming

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

The idea behind Aluminum Corp of and Guangdong Jinming Machinery 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.