Correlation Between Century Aluminum and POSCO Holdings
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and POSCO Holdings 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 POSCO Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and POSCO Holdings, you can compare the effects of market volatilities on Century Aluminum and POSCO Holdings 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 POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and POSCO Holdings.
Diversification Opportunities for Century Aluminum and POSCO Holdings
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Century and POSCO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings 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 POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Century Aluminum i.e., Century Aluminum and POSCO Holdings go up and down completely randomly.
Pair Corralation between Century Aluminum and POSCO Holdings
Given the investment horizon of 90 days Century Aluminum is expected to generate 1.9 times more return on investment than POSCO Holdings. However, Century Aluminum is 1.9 times more volatile than POSCO Holdings. It trades about 0.08 of its potential returns per unit of risk. POSCO Holdings is currently generating about -0.11 per unit of risk. If you would invest 1,037 in Century Aluminum on November 3, 2024 and sell it today you would earn a total of 791.00 from holding Century Aluminum or generate 76.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Aluminum vs. POSCO Holdings
Performance |
| Timeline |
| Century Aluminum |
| POSCO Holdings |
Century Aluminum and POSCO Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and POSCO Holdings
The main advantage of trading using opposite Century Aluminum and POSCO Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, POSCO Holdings 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 POSCO Holdings will offset losses from the drop in POSCO Holdings' 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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