Correlation Between Aluminum and DAIDO METAL

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

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

Diversification Opportunities for Aluminum and DAIDO METAL

0.71

Correlation Coefficient

Aluminum  DAIDO METAL

Poor diversification

The 3 months correlation between Aluminum and DAIDO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and DAIDO METAL TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIDO METAL TD and 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 Aluminum of are associated (or correlated) with DAIDO METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIDO METAL TD has no effect on the direction of Aluminum i.e., Aluminum and DAIDO METAL go up and down completely randomly.

Pair Corralation between Aluminum and DAIDO METAL

Assuming the 90 days horizon Aluminum of is expected to generate 0.85 times more return on investment than DAIDO METAL. However, Aluminum of is 1.18 times less risky than DAIDO METAL. It trades about 0.25 of its potential returns per unit of risk. DAIDO METAL TD is currently generating about 0.16 per unit of risk. If you would invest  46.00  in Aluminum of on May 5, 2025 and sell it today you would earn a total of  22.00  from holding Aluminum of or generate 47.83% return on investment over 90 days.

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

Aluminum of  vs.  DAIDO METAL TD

Aluminum

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

DAIDO METAL TD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DAIDO METAL TD are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DAIDO METAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aluminum and DAIDO METAL

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

The idea behind Aluminum of and DAIDO METAL TD 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.