Correlation Between Aluminumof China and National Storage

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

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

Diversification Opportunities for Aluminumof China and National Storage

0.38

Correlation Coefficient

Aluminumof China  National Storage

Weak diversification

The 3 months correlation between Aluminumof and National is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and National Storage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage REIT and Aluminumof China 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage REIT has no effect on the direction of Aluminumof China i.e., Aluminumof China and National Storage go up and down completely randomly.

Pair Corralation between Aluminumof China and National Storage

Assuming the 90 days horizon Aluminum of is expected to under-perform the National Storage. In addition to that, Aluminumof China is 1.12 times more volatile than National Storage REIT. It trades about -0.06 of its total potential returns per unit of risk. National Storage REIT is currently generating about -0.02 per unit of volatility. If you would invest  159.00  in National Storage REIT on October 25, 2024 and sell it today you would lose (15.00) from holding National Storage REIT or give up 9.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Aluminum of  vs.  National Storage REIT

Aluminumof China

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 weak 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.

National Storage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, National Storage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aluminumof China and National Storage

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

The idea behind Aluminum of and National Storage REIT 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.