Correlation Between Century Aluminum and FMC
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and FMC 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 FMC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and FMC Corporation, you can compare the effects of market volatilities on Century Aluminum and FMC 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 FMC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and FMC.
Diversification Opportunities for Century Aluminum and FMC
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Century and FMC is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and FMC Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FMC Corporation 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 FMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FMC Corporation has no effect on the direction of Century Aluminum i.e., Century Aluminum and FMC go up and down completely randomly.
Pair Corralation between Century Aluminum and FMC
Given the investment horizon of 90 days Century Aluminum is expected to generate 1.68 times more return on investment than FMC. However, Century Aluminum is 1.68 times more volatile than FMC Corporation. It trades about 0.23 of its potential returns per unit of risk. FMC Corporation is currently generating about -0.06 per unit of risk. If you would invest 1,615 in Century Aluminum on August 28, 2024 and sell it today you would earn a total of 709.00 from holding Century Aluminum or generate 43.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Aluminum vs. FMC Corp.
Performance |
| Timeline |
| Century Aluminum |
| FMC Corporation |
Century Aluminum and FMC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and FMC
The main advantage of trading using opposite Century Aluminum and FMC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, FMC 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 FMC will offset losses from the drop in FMC's long position.| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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