Correlation Between Aluminumof China and CVB Financial

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

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

Diversification Opportunities for Aluminumof China and CVB Financial

-0.46

Correlation Coefficient

Aluminumof China  CVB Financial

Very good diversification

The 3 months correlation between Aluminumof and CVB is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and CVB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial Corp 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 CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial Corp has no effect on the direction of Aluminumof China i.e., Aluminumof China and CVB Financial go up and down completely randomly.

Pair Corralation between Aluminumof China and CVB Financial

Assuming the 90 days horizon Aluminum of is expected to generate 1.52 times more return on investment than CVB Financial. However, Aluminumof China is 1.52 times more volatile than CVB Financial Corp. It trades about 0.08 of its potential returns per unit of risk. CVB Financial Corp is currently generating about 0.05 per unit of risk. If you would invest  32.00  in Aluminum of on October 9, 2024 and sell it today you would earn a total of  21.00  from holding Aluminum of or generate 65.63% return on investment over 90 days.

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

Aluminum of  vs.  CVB Financial Corp

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 nearly stable basic indicators, Aluminumof China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CVB Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aluminumof China and CVB Financial

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

The idea behind Aluminum of and CVB Financial Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.