Correlation Between Kaiser Aluminum and Sea
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum and Sea 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 Kaiser Aluminum and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Sea, you can compare the effects of market volatilities on Kaiser Aluminum and Sea 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 Kaiser Aluminum with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Sea.
Diversification Opportunities for Kaiser Aluminum and Sea
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kaiser and Sea is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Kaiser 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 Kaiser Aluminum are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Sea go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and Sea
Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 2.94 times less return on investment than Sea. But when comparing it to its historical volatility, Kaiser Aluminum is 1.14 times less risky than Sea. It trades about 0.12 of its potential returns per unit of risk. Sea is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 9,535 in Sea on August 31, 2024 and sell it today you would earn a total of 2,036 from holding Sea or generate 21.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaiser Aluminum vs. Sea
Performance |
| Timeline |
| Kaiser Aluminum |
| Sea |
Kaiser Aluminum and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and Sea
The main advantage of trading using opposite Kaiser Aluminum and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| Kaiser Aluminum vs. RLJ Lodging Trust | Kaiser Aluminum vs. Aquagold International | Kaiser Aluminum vs. Stepstone Group | Kaiser Aluminum vs. Morningstar Unconstrained Allocation |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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