Correlation Between Commercial Metals and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Commercial Metals 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 Commercial Metals and Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Metals and Century Aluminum, you can compare the effects of market volatilities on Commercial Metals 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 Commercial Metals with a short position of Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Metals and Century Aluminum.
Diversification Opportunities for Commercial Metals and Century Aluminum
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Commercial and Century is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and Commercial Metals 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 Commercial Metals 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 Commercial Metals i.e., Commercial Metals and Century Aluminum go up and down completely randomly.
Pair Corralation between Commercial Metals and Century Aluminum
Considering the 90-day investment horizon Commercial Metals is expected to generate 2.32 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, Commercial Metals is 1.57 times less risky than Century Aluminum. It trades about 0.18 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,781 in Century Aluminum on August 30, 2024 and sell it today you would earn a total of 523.00 from holding Century Aluminum or generate 29.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Commercial Metals vs. Century Aluminum
Performance |
| Timeline |
| Commercial Metals |
| Century Aluminum |
Commercial Metals and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commercial Metals and Century Aluminum
The main advantage of trading using opposite Commercial Metals and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Metals 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.| Commercial Metals vs. Olympic Steel | Commercial Metals vs. Steel Dynamics | Commercial Metals vs. Nucor Corp | Commercial Metals vs. Universal Stainless Alloy |
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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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