Correlation Between Aluminumof China and Dillards

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

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

Diversification Opportunities for Aluminumof China and Dillards

-0.15

Correlation Coefficient

Aluminumof China  Dillards

Good diversification

The 3 months correlation between Aluminumof and Dillards is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Dillards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dillards 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 Dillards. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dillards has no effect on the direction of Aluminumof China i.e., Aluminumof China and Dillards go up and down completely randomly.

Pair Corralation between Aluminumof China and Dillards

Assuming the 90 days horizon Aluminum of is expected to generate 1.01 times more return on investment than Dillards. However, Aluminumof China is 1.01 times more volatile than Dillards. It trades about 0.06 of its potential returns per unit of risk. Dillards is currently generating about -0.12 per unit of risk. If you would invest  55.00  in Aluminum of on December 25, 2024 and sell it today you would earn a total of  5.00  from holding Aluminum of or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Aluminum of  vs.  Dillards

Aluminumof China

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminumof China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dillards

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aluminumof China and Dillards

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

The idea behind Aluminum of and Dillards 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.