Correlation Between Aluminum and ITALIAN WINE

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

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

Diversification Opportunities for Aluminum and ITALIAN WINE

0.09

Correlation Coefficient

Aluminum  ITALIAN WINE

Significant diversification

The 3 months correlation between Aluminum and ITALIAN is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS 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 ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of Aluminum i.e., Aluminum and ITALIAN WINE go up and down completely randomly.

Pair Corralation between Aluminum and ITALIAN WINE

Assuming the 90 days horizon Aluminum of is expected to generate 1.65 times more return on investment than ITALIAN WINE. However, Aluminum is 1.65 times more volatile than ITALIAN WINE BRANDS. It trades about 0.05 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about -0.01 per unit of risk. If you would invest  32.00  in Aluminum of on October 25, 2024 and sell it today you would earn a total of  27.00  from holding Aluminum of or generate 84.38% return on investment over 90 days.

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

Aluminum of  vs.  ITALIAN WINE BRANDS

Aluminum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ITALIAN WINE BRANDS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aluminum and ITALIAN WINE

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

The idea behind Aluminum of and ITALIAN WINE BRANDS 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.