Correlation Between Aluminumof China and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both Aluminumof China 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 Aluminumof China and Kaiser 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 Kaiser Aluminum, you can compare the effects of market volatilities on Aluminumof China 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 Aluminumof China with a short position of Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Kaiser Aluminum.
Diversification Opportunities for Aluminumof China and Kaiser Aluminum
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Aluminumof and Kaiser is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser 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 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 Aluminumof China i.e., Aluminumof China and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between Aluminumof China and Kaiser Aluminum
Assuming the 90 days horizon Aluminum of is expected to generate 1.32 times more return on investment than Kaiser Aluminum. However, Aluminumof China is 1.32 times more volatile than Kaiser Aluminum. It trades about 0.09 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.05 per unit of risk. If you would invest 32.00 in Aluminum of on August 25, 2024 and sell it today you would earn a total of 25.00 from holding Aluminum of or generate 78.12% 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. Kaiser Aluminum
Performance |
| Timeline |
| Aluminumof China |
| Kaiser Aluminum |
Aluminumof China and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminumof China and Kaiser Aluminum
The main advantage of trading using opposite Aluminumof China and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China 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.| Aluminumof China vs. Materialise NV | Aluminumof China vs. Air Transport Services | Aluminumof China vs. Martin Marietta Materials | Aluminumof China vs. Summit Materials |
| Kaiser Aluminum vs. Norsk Hydro ASA | Kaiser Aluminum vs. Norsk Hydro ASA | Kaiser Aluminum vs. Aluminum of | Kaiser Aluminum vs. AMAG Austria Metall |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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