Correlation Between Aluminum and Initio

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

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

Diversification Opportunities for Aluminum and Initio

0.16

Correlation Coefficient

Aluminum  Initio

Average diversification

The 3 months correlation between Aluminum and Initio is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Initio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Initio Inc and 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 Aluminum of are associated (or correlated) with Initio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Initio Inc has no effect on the direction of Aluminum i.e., Aluminum and Initio go up and down completely randomly.

Pair Corralation between Aluminum and Initio

Assuming the 90 days horizon Aluminum of is expected to generate 0.92 times more return on investment than Initio. However, Aluminum of is 1.09 times less risky than Initio. It trades about -0.21 of its potential returns per unit of risk. Initio Inc is currently generating about -0.22 per unit of risk. If you would invest  63.00  in Aluminum of on October 12, 2024 and sell it today you would lose (9.00) from holding Aluminum of or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Aluminum of  vs.  Initio Inc

Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Initio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Initio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aluminum and Initio

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

The idea behind Aluminum of and Initio Inc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..