Correlation Between Alumina and Tinybeans Group

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

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

Diversification Opportunities for Alumina and Tinybeans Group

-0.54

Correlation Coefficient

Alumina  Tinybeans Group

Excellent diversification

The 3 months correlation between Alumina and Tinybeans is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited and Tinybeans Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tinybeans Group and Alumina 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 Alumina Limited are associated (or correlated) with Tinybeans Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tinybeans Group has no effect on the direction of Alumina i.e., Alumina and Tinybeans Group go up and down completely randomly.

Pair Corralation between Alumina and Tinybeans Group

Assuming the 90 days horizon Alumina is expected to generate 94.84 times less return on investment than Tinybeans Group. But when comparing it to its historical volatility, Alumina Limited is 238.38 times less risky than Tinybeans Group. It trades about 0.24 of its potential returns per unit of risk. Tinybeans Group Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.30  in Tinybeans Group Limited on July 13, 2024 and sell it today you would earn a total of  1.70  from holding Tinybeans Group Limited or generate 51.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.57%
Values	Daily Returns

Alumina Limited  vs.  Tinybeans Group Limited

Alumina Limited

Risk-Adjusted Performance

0 of 100

Solid

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

Tinybeans Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tinybeans Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tinybeans Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alumina and Tinybeans Group

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

The idea behind Alumina Limited and Tinybeans Group 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.