Correlation Between Aluminum Corp and Citic Guoan

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

Diversification Opportunities for Aluminum Corp and Citic Guoan

-0.23

Correlation Coefficient

Aluminum Corp  Citic Guoan

Very good diversification

The 3 months correlation between Aluminum and Citic is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum Corp of and Citic Guoan Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Guoan Wine 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 Citic Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Guoan Wine has no effect on the direction of Aluminum Corp i.e., Aluminum Corp and Citic Guoan go up and down completely randomly.

Pair Corralation between Aluminum Corp and Citic Guoan

Assuming the 90 days trading horizon Aluminum Corp of is expected to under-perform the Citic Guoan. But the stock apears to be less risky and, when comparing its historical volatility, Aluminum Corp of is 1.17 times less risky than Citic Guoan. The stock trades about -0.1 of its potential returns per unit of risk. The Citic Guoan Wine is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  582.00  in Citic Guoan Wine on October 8, 2024 and sell it today you would lose (83.00) from holding Citic Guoan Wine or give up 14.26% of portfolio value over 90 days.

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

Aluminum Corp of  vs.  Citic Guoan Wine

Aluminum Corp

Risk-Adjusted Performance

0 of 100

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 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.

Citic Guoan Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citic Guoan Wine 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.

Pair Trading with Aluminum Corp and Citic Guoan

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

The idea behind Aluminum Corp of and Citic Guoan Wine 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.