Correlation Between Century Aluminum and Aegon NV
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and Aegon NV 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 Century Aluminum and Aegon NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and Aegon NV ADR, you can compare the effects of market volatilities on Century Aluminum and Aegon NV 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 Century Aluminum with a short position of Aegon NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and Aegon NV.
Diversification Opportunities for Century Aluminum and Aegon NV
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Century and Aegon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR and Century 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 Century Aluminum are associated (or correlated) with Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of Century Aluminum i.e., Century Aluminum and Aegon NV go up and down completely randomly.
Pair Corralation between Century Aluminum and Aegon NV
Given the investment horizon of 90 days Century Aluminum is expected to generate 3.34 times more return on investment than Aegon NV. However, Century Aluminum is 3.34 times more volatile than Aegon NV ADR. It trades about 0.25 of its potential returns per unit of risk. Aegon NV ADR is currently generating about -0.03 per unit of risk. If you would invest 1,781 in Century Aluminum on August 30, 2024 and sell it today you would earn a total of 523.00 from holding Century Aluminum or generate 29.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Aluminum vs. Aegon NV ADR
Performance |
| Timeline |
| Century Aluminum |
| Aegon NV ADR |
Century Aluminum and Aegon NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and Aegon NV
The main advantage of trading using opposite Century Aluminum and Aegon NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, Aegon NV 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 Aegon NV will offset losses from the drop in Aegon NV's long position.| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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