Correlation Between China Aircraft and Kaiser Aluminum

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

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

Diversification Opportunities for China Aircraft and Kaiser Aluminum

-0.85

Correlation Coefficient

China Aircraft  Kaiser Aluminum

Pay attention - limited upside

The 3 months correlation between China and Kaiser is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum and China Aircraft 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 Aircraft Leasing are associated (or correlated) with Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of China Aircraft i.e., China Aircraft and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between China Aircraft and Kaiser Aluminum

If you would invest  8,516  in Kaiser Aluminum on January 26, 2024 and sell it today you would earn a total of  217.00  from holding Kaiser Aluminum or generate 2.55% return on investment over 90 days.

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

China Aircraft Leasing  vs.  Kaiser Aluminum

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kaiser Aluminum

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Kaiser Aluminum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Aircraft and Kaiser Aluminum

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

The idea behind China Aircraft Leasing and Kaiser 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.