Correlation Between Avanos Medical and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Avanos Medical 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 Avanos Medical and Kaiser Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avanos Medical and Kaiser Aluminum, you can compare the effects of market volatilities on Avanos Medical 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 Avanos Medical with a short position of Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avanos Medical and Kaiser Aluminum.
Diversification Opportunities for Avanos Medical and Kaiser Aluminum
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Avanos and Kaiser is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum and Avanos Medical 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 Avanos Medical 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 Avanos Medical i.e., Avanos Medical and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Avanos Medical and Kaiser Aluminum
Assuming the 90 days horizon Avanos Medical is expected to under-perform the Kaiser Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, Avanos Medical is 1.1 times less risky than Kaiser Aluminum. The stock trades about -0.18 of its potential returns per unit of risk. The Kaiser Aluminum is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 8,000 in Kaiser Aluminum on September 13, 2024 and sell it today you would lose (700.00) from holding Kaiser Aluminum or give up 8.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Avanos Medical vs. Kaiser Aluminum
Performance |
| Timeline |
| Avanos Medical |
| Kaiser Aluminum |
Avanos Medical and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avanos Medical and Kaiser Aluminum
The main advantage of trading using opposite Avanos Medical and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanos Medical 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.| Avanos Medical vs. STMicroelectronics NV | Avanos Medical vs. ELECTRONIC ARTS | Avanos Medical vs. EHEALTH | Avanos Medical vs. METHODE ELECTRONICS |
| Kaiser Aluminum vs. Norsk Hydro ASA | Kaiser Aluminum vs. Aluminum of | Kaiser Aluminum vs. Superior Plus Corp | Kaiser Aluminum vs. SIVERS SEMICONDUCTORS AB |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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