Correlation Between Aluminumof China and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Aluminumof China and Century 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 Aluminumof China and Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Century Aluminum, you can compare the effects of market volatilities on Aluminumof China and Century 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 Aluminumof China with a short position of Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Century Aluminum.
Diversification Opportunities for Aluminumof China and Century Aluminum
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aluminumof and Century is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and Aluminumof China 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Aluminumof China i.e., Aluminumof China and Century Aluminum go up and down completely randomly.
Pair Corralation between Aluminumof China and Century Aluminum
Assuming the 90 days horizon Aluminum of is expected to generate 0.87 times more return on investment than Century Aluminum. However, Aluminum of is 1.15 times less risky than Century Aluminum. It trades about 0.06 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.03 per unit of risk. If you would invest 45.00 in Aluminum of on November 7, 2024 and sell it today you would earn a total of 16.00 from holding Aluminum of or generate 35.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aluminum of vs. Century Aluminum
Performance |
| Timeline |
| Aluminumof China |
| Century Aluminum |
Aluminumof China and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Century Aluminum
The main advantage of trading using opposite Aluminumof China and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Century 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| Aluminumof China vs. UNITED RENTALS | Aluminumof China vs. OFFICE DEPOT | Aluminumof China vs. BORR DRILLING NEW | Aluminumof China vs. SCANSOURCE |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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