Correlation Between Century Aluminum and SkyWest

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Can any of the company-specific risk be diversified away by investing in both Century Aluminum and SkyWest 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 SkyWest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and SkyWest, you can compare the effects of market volatilities on Century Aluminum and SkyWest 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 SkyWest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and SkyWest.

Diversification Opportunities for Century Aluminum and SkyWest

CenturySkyWestDiversified AwayCenturySkyWestDiversified Away100%
0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Century and SkyWest is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and SkyWest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SkyWest 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 SkyWest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SkyWest has no effect on the direction of Century Aluminum i.e., Century Aluminum and SkyWest go up and down completely randomly.

Pair Corralation between Century Aluminum and SkyWest

Given the investment horizon of 90 days Century Aluminum is expected to under-perform the SkyWest. In addition to that, Century Aluminum is 1.44 times more volatile than SkyWest. It trades about -0.43 of its total potential returns per unit of risk. SkyWest is currently generating about -0.34 per unit of volatility. If you would invest  11,419  in SkyWest on September 24, 2024 and sell it today you would lose (1,380) from holding SkyWest or give up 12.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Century Aluminum  vs.  SkyWest

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 0102030405060
JavaScript chart by amCharts 3.21.15CENX SKYW
       Timeline  
Century Aluminum 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Century Aluminum showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec161820222426
SkyWest 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in SkyWest are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SkyWest showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec859095100105110115

Century Aluminum and SkyWest Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-12.16-9.11-6.06-3.00.05363.216.439.6412.86 0.020.040.060.08
JavaScript chart by amCharts 3.21.15CENX SKYW
       Returns  

Pair Trading with Century Aluminum and SkyWest

The main advantage of trading using opposite Century Aluminum and SkyWest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, SkyWest 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 SkyWest will offset losses from the drop in SkyWest's long position.
The idea behind Century Aluminum and SkyWest 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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