Correlation Between Alumina and Covestro ADR

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

By analyzing existing cross correlation between Alumina Limited and Covestro ADR, you can compare the effects of market volatilities on Alumina and Covestro ADR 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 Alumina with a short position of Covestro ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumina and Covestro ADR.

Diversification Opportunities for Alumina and Covestro ADR

0.0

Correlation Coefficient

Alumina  Covestro ADR

Pay attention - limited upside

The 3 months correlation between Alumina and Covestro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited and Covestro ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covestro ADR and Alumina 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 Alumina Limited are associated (or correlated) with Covestro ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covestro ADR has no effect on the direction of Alumina i.e., Alumina and Covestro ADR go up and down completely randomly.

Pair Corralation between Alumina and Covestro ADR

If you would invest  2,906  in Covestro ADR on December 30, 2024 and sell it today you would earn a total of  242.00  from holding Covestro ADR or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Alumina Limited  vs.  Covestro ADR

Alumina Limited

Risk-Adjusted Performance

Very Weak

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

Covestro ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Covestro ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Covestro ADR may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alumina and Covestro ADR

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

The idea behind Alumina Limited and Covestro ADR 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.