Correlation Between Kaiser Aluminum and United States
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and United States Steel, you can compare the effects of market volatilities on Kaiser Aluminum and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and United States.
Diversification Opportunities for Kaiser Aluminum and United States
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kaiser and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and United States go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and United States
Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 0.78 times more return on investment than United States. However, Kaiser Aluminum is 1.28 times less risky than United States. It trades about 0.19 of its potential returns per unit of risk. United States Steel is currently generating about 0.02 per unit of risk. If you would invest 7,607 in Kaiser Aluminum on August 27, 2024 and sell it today you would earn a total of 771.00 from holding Kaiser Aluminum or generate 10.14% 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. United States Steel
Performance |
| Timeline |
| Kaiser Aluminum |
| United States Steel |
Kaiser Aluminum and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and United States
The main advantage of trading using opposite Kaiser Aluminum and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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