Correlation Between Kaiser Aluminum and Huadi International

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

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

Diversification Opportunities for Kaiser Aluminum and Huadi International

0.16

Correlation Coefficient

Kaiser Aluminum  Huadi International

Average diversification

The 3 months correlation between Kaiser and Huadi is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Huadi International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huadi International 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 Huadi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huadi International has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Huadi International go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Huadi International

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 0.46 times more return on investment than Huadi International. However, Kaiser Aluminum is 2.19 times less risky than Huadi International. It trades about -0.03 of its potential returns per unit of risk. Huadi International Group is currently generating about -0.02 per unit of risk. If you would invest  6,859  in Kaiser Aluminum on December 27, 2024 and sell it today you would lose (321.00) from holding Kaiser Aluminum or give up 4.68% of portfolio value over 90 days.

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

Kaiser Aluminum  vs.  Huadi International Group

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Huadi International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Kaiser Aluminum and Huadi International

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

The idea behind Kaiser Aluminum and Huadi International Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.