Correlation Between Century Aluminum and MSP Recovery
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and MSP Recovery 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 MSP Recovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and MSP Recovery, you can compare the effects of market volatilities on Century Aluminum and MSP Recovery 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 MSP Recovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and MSP Recovery.
Diversification Opportunities for Century Aluminum and MSP Recovery
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Century and MSP is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Century Aluminum i.e., Century Aluminum and MSP Recovery go up and down completely randomly.
Pair Corralation between Century Aluminum and MSP Recovery
Given the investment horizon of 90 days Century Aluminum is expected to generate 68.89 times less return on investment than MSP Recovery. But when comparing it to its historical volatility, Century Aluminum is 33.53 times less risky than MSP Recovery. It trades about 0.07 of its potential returns per unit of risk. MSP Recovery is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 130.00 in MSP Recovery on August 26, 2024 and sell it today you would lose (122.54) from holding MSP Recovery or give up 94.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 50.3% |
| Values | Daily Returns |
Century Aluminum vs. MSP Recovery
Performance |
| Timeline |
| Century Aluminum |
| MSP Recovery |
Century Aluminum and MSP Recovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and MSP Recovery
The main advantage of trading using opposite Century Aluminum and MSP Recovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, MSP Recovery 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 MSP Recovery will offset losses from the drop in MSP Recovery's long position.The idea behind Century Aluminum and MSP Recovery pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| MSP Recovery vs. Century Aluminum | MSP Recovery vs. ArcelorMittal SA ADR | MSP Recovery vs. Huadi International Group | MSP Recovery vs. Xponential Fitness |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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