Correlation Between Century Aluminum and Worthington Steel
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and Worthington Steel 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 Worthington Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and Worthington Steel, you can compare the effects of market volatilities on Century Aluminum and Worthington Steel 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 Worthington Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and Worthington Steel.
Diversification Opportunities for Century Aluminum and Worthington Steel
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Century and Worthington is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel 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 Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of Century Aluminum i.e., Century Aluminum and Worthington Steel go up and down completely randomly.
Pair Corralation between Century Aluminum and Worthington Steel
Given the investment horizon of 90 days Century Aluminum is expected to generate 1.19 times less return on investment than Worthington Steel. In addition to that, Century Aluminum is 1.39 times more volatile than Worthington Steel. It trades about 0.05 of its total potential returns per unit of risk. Worthington Steel is currently generating about 0.09 per unit of volatility. If you would invest 3,366 in Worthington Steel on August 26, 2024 and sell it today you would earn a total of 1,148 from holding Worthington Steel or generate 34.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Aluminum vs. Worthington Steel
Performance |
| Timeline |
| Century Aluminum |
| Worthington Steel |
Century Aluminum and Worthington Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Aluminum and Worthington Steel
The main advantage of trading using opposite Century Aluminum and Worthington Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, Worthington Steel 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 Worthington Steel will offset losses from the drop in Worthington Steel's long position.The idea behind Century Aluminum and Worthington Steel 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.| Worthington Steel vs. Everus Construction Group | Worthington Steel vs. SkyWest | Worthington Steel vs. Warner Music Group | Worthington Steel vs. Mesa Air Group |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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