Correlation Between Century Aluminum and Microchip Technology
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and Microchip Technology 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 Microchip Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and Microchip Technology, you can compare the effects of market volatilities on Century Aluminum and Microchip Technology 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 Microchip Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and Microchip Technology.
Diversification Opportunities for Century Aluminum and Microchip Technology
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Century and Microchip is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Microchip Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of Century Aluminum i.e., Century Aluminum and Microchip Technology go up and down completely randomly.
Pair Corralation between Century Aluminum and Microchip Technology
Given the investment horizon of 90 days Century Aluminum is expected to generate 1.8 times more return on investment than Microchip Technology. However, Century Aluminum is 1.8 times more volatile than Microchip Technology. It trades about 0.07 of its potential returns per unit of risk. Microchip Technology is currently generating about 0.0 per unit of risk. If you would invest 775.00 in Century Aluminum on August 30, 2024 and sell it today you would earn a total of 1,529 from holding Century Aluminum or generate 197.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Aluminum vs. Microchip Technology
Performance |
| Timeline |
| Century Aluminum |
| Microchip Technology |
Century Aluminum and Microchip Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and Microchip Technology
The main advantage of trading using opposite Century Aluminum and Microchip Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, Microchip Technology 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 Microchip Technology will offset losses from the drop in Microchip Technology's long position.| Century Aluminum vs. Direxion Daily FTSE | Century Aluminum vs. Dodge Global Stock | Century Aluminum vs. Collegium Pharmaceutical | Century Aluminum vs. Dreyfus Natural Resources |
| Microchip Technology vs. ABIVAX Socit Anonyme | Microchip Technology vs. Morningstar Unconstrained Allocation | Microchip Technology vs. SPACE | Microchip Technology vs. Knife River |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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