Correlation Between Kaiser Aluminum and Hongli Group

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

By analyzing existing cross correlation between Kaiser Aluminum and Hongli Group Ordinary, you can compare the effects of market volatilities on Kaiser Aluminum and Hongli Group 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 Kaiser Aluminum with a short position of Hongli Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Hongli Group.

Diversification Opportunities for Kaiser Aluminum and Hongli Group

0.27

Correlation Coefficient

Kaiser Aluminum  Hongli Group

Modest diversification

The 3 months correlation between Kaiser and Hongli is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary and Kaiser 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 Kaiser Aluminum are associated (or correlated) with Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Hongli Group go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Hongli Group

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 1.06 times less return on investment than Hongli Group. But when comparing it to its historical volatility, Kaiser Aluminum is 2.03 times less risky than Hongli Group. It trades about 0.03 of its potential returns per unit of risk. Hongli Group Ordinary is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Hongli Group Ordinary on December 19, 2024 and sell it today you would lose (1.00) from holding Hongli Group Ordinary or give up 0.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Kaiser Aluminum  vs.  Hongli Group Ordinary

Kaiser Aluminum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Hongli Group Ordinary

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hongli Group Ordinary are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Hongli Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kaiser Aluminum and Hongli Group

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

The idea behind Kaiser Aluminum and Hongli Group Ordinary 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.