Correlation Between Aluminumof China and Atlas Copco

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

By analyzing existing cross correlation between Aluminum of and Atlas Copco A, you can compare the effects of market volatilities on Aluminumof China and Atlas Copco 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 Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Atlas Copco.

Diversification Opportunities for Aluminumof China and Atlas Copco

0.44

Correlation Coefficient

Aluminumof China  Atlas Copco

Very weak diversification

The 3 months correlation between Aluminumof and Atlas is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Atlas Copco A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco A 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 Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco A has no effect on the direction of Aluminumof China i.e., Aluminumof China and Atlas Copco go up and down completely randomly.

Pair Corralation between Aluminumof China and Atlas Copco

Assuming the 90 days horizon Aluminum of is expected to generate 2.51 times more return on investment than Atlas Copco. However, Aluminumof China is 2.51 times more volatile than Atlas Copco A. It trades about 0.09 of its potential returns per unit of risk. Atlas Copco A is currently generating about 0.01 per unit of risk. If you would invest  45.00  in Aluminum of on September 16, 2024 and sell it today you would earn a total of  10.00  from holding Aluminum of or generate 22.22% return on investment over 90 days.

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

Aluminum of  vs.  Atlas Copco A

Aluminumof China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

Atlas Copco A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlas Copco A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Atlas Copco is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aluminumof China and Atlas Copco

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

The idea behind Aluminum of and Atlas Copco A 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.