Correlation Between Aluminum Corp and Shandong Huifa

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

Diversification Opportunities for Aluminum Corp and Shandong Huifa

-0.05

Correlation Coefficient

Aluminum Corp  Shandong Huifa

Good diversification

The 3 months correlation between Aluminum and Shandong is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum Corp of and Shandong Huifa Foodstuff in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Huifa Foodstuff 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 Shandong Huifa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Huifa Foodstuff has no effect on the direction of Aluminum Corp i.e., Aluminum Corp and Shandong Huifa go up and down completely randomly.

Pair Corralation between Aluminum Corp and Shandong Huifa

Assuming the 90 days trading horizon Aluminum Corp of is expected to under-perform the Shandong Huifa. But the stock apears to be less risky and, when comparing its historical volatility, Aluminum Corp of is 2.87 times less risky than Shandong Huifa. The stock trades about -0.05 of its potential returns per unit of risk. The Shandong Huifa Foodstuff is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,171  in Shandong Huifa Foodstuff on December 1, 2024 and sell it today you would lose (116.00) from holding Shandong Huifa Foodstuff or give up 9.91% 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.  Shandong Huifa Foodstuff

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.

Shandong Huifa Foodstuff

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aluminum Corp and Shandong Huifa

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

The idea behind Aluminum Corp of and Shandong Huifa Foodstuff 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.