Correlation Between Century Aluminum and China Hongqiao
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and China Hongqiao 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 China Hongqiao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and China Hongqiao Group, you can compare the effects of market volatilities on Century Aluminum and China Hongqiao 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 China Hongqiao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and China Hongqiao.
Diversification Opportunities for Century Aluminum and China Hongqiao
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Century and China is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and China Hongqiao Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Hongqiao Group 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 China Hongqiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Hongqiao Group has no effect on the direction of Century Aluminum i.e., Century Aluminum and China Hongqiao go up and down completely randomly.
Pair Corralation between Century Aluminum and China Hongqiao
Given the investment horizon of 90 days Century Aluminum is expected to generate 6.54 times more return on investment than China Hongqiao. However, Century Aluminum is 6.54 times more volatile than China Hongqiao Group. It trades about 0.03 of its potential returns per unit of risk. China Hongqiao Group is currently generating about -0.22 per unit of risk. If you would invest 2,073 in Century Aluminum on November 18, 2024 and sell it today you would earn a total of 21.00 from holding Century Aluminum or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Aluminum vs. China Hongqiao Group
Performance |
| Timeline |
| Century Aluminum |
| China Hongqiao Group |
Century Aluminum and China Hongqiao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and China Hongqiao
The main advantage of trading using opposite Century Aluminum and China Hongqiao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, China Hongqiao 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 China Hongqiao will offset losses from the drop in China Hongqiao's long position.| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
| China Hongqiao vs. Kaiser Aluminum | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Constellium Nv | China Hongqiao vs. Alcoa Corp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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