Correlation Between Cool and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Cool and Century Aluminum 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 Cool and Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cool Company and Century Aluminum, you can compare the effects of market volatilities on Cool and Century Aluminum 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 Cool with a short position of Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cool and Century Aluminum.
Diversification Opportunities for Cool and Century Aluminum
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cool and Century is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cool Company and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and Cool 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 Cool Company are associated (or correlated) with Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Cool i.e., Cool and Century Aluminum go up and down completely randomly.
Pair Corralation between Cool and Century Aluminum
Given the investment horizon of 90 days Cool Company is expected to under-perform the Century Aluminum. In addition to that, Cool is 1.28 times more volatile than Century Aluminum. It trades about -0.47 of its total potential returns per unit of risk. Century Aluminum is currently generating about 0.07 per unit of volatility. If you would invest 2,069 in Century Aluminum on September 14, 2024 and sell it today you would earn a total of 73.00 from holding Century Aluminum or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cool Company vs. Century Aluminum
Performance |
| Timeline |
| Cool Company |
| Century Aluminum |
Cool and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cool and Century Aluminum
The main advantage of trading using opposite Cool and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cool position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| Cool vs. Century Aluminum | Cool vs. Cedar Realty Trust | Cool vs. Coupang LLC | Cool vs. SunLink Health Systems |
| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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