Correlation Between Treasury Metals and Alumina

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

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

Diversification Opportunities for Treasury Metals and Alumina

0.89

Correlation Coefficient

Treasury Metals  Alumina

Very poor diversification

The 3 months correlation between Treasury and Alumina is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Metals and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited and Treasury Metals 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 Treasury Metals are associated (or correlated) with Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of Treasury Metals i.e., Treasury Metals and Alumina go up and down completely randomly.

Pair Corralation between Treasury Metals and Alumina

Assuming the 90 days horizon Treasury Metals is expected to under-perform the Alumina. In addition to that, Treasury Metals is 1.69 times more volatile than Alumina Limited. It trades about 0.0 of its total potential returns per unit of risk. Alumina Limited is currently generating about 0.01 per unit of volatility. If you would invest  120.00  in Alumina Limited on February 3, 2024 and sell it today you would lose (18.00) from holding Alumina Limited or give up 15.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	89.47%
Values	Daily Returns

Treasury Metals  vs.  Alumina Limited

Treasury Metals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Metals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Treasury Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Alumina Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alumina Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, Alumina reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Metals and Alumina

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

The idea behind Treasury Metals and Alumina Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.