Correlation Between China Hongqiao and Aluminum

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

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

Diversification Opportunities for China Hongqiao and Aluminum

0.75

Correlation Coefficient

China Hongqiao  Aluminum

Poor diversification

The 3 months correlation between China and Aluminum is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Hongqiao Group and Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum and China Hongqiao 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 China Hongqiao Group are associated (or correlated) with Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of China Hongqiao i.e., China Hongqiao and Aluminum go up and down completely randomly.

Pair Corralation between China Hongqiao and Aluminum

If you would invest  63.00  in China Hongqiao Group on February 7, 2024 and sell it today you would earn a total of  52.00  from holding China Hongqiao Group or generate 82.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.37%
Values	Daily Returns

China Hongqiao Group  vs.  Aluminum

China Hongqiao Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Hongqiao Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Hongqiao reported solid returns over the last few months and may actually be approaching a breakup point.

Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Hongqiao and Aluminum

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

The idea behind China Hongqiao Group and Aluminum 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.