Correlation Between Kaiser Aluminum and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum 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 Kaiser Aluminum and Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Century Aluminum, you can compare the effects of market volatilities on Kaiser Aluminum 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 Kaiser Aluminum with a short position of Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Century Aluminum.
Diversification Opportunities for Kaiser Aluminum and Century Aluminum
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kaiser and Century is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 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 Kaiser Aluminum i.e., Kaiser Aluminum and Century Aluminum go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and Century Aluminum
Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 6.39 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, Kaiser Aluminum is 1.49 times less risky than Century Aluminum. It trades about 0.02 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 757.00 in Century Aluminum on September 3, 2024 and sell it today you would earn a total of 1,419 from holding Century Aluminum or generate 187.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaiser Aluminum vs. Century Aluminum
Performance |
| Timeline |
| Kaiser Aluminum |
| Century Aluminum |
Kaiser Aluminum and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaiser Aluminum and Century Aluminum
The main advantage of trading using opposite Kaiser Aluminum and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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.| Kaiser Aluminum vs. Norsk Hydro ASA | Kaiser Aluminum vs. Aluminum of | Kaiser Aluminum vs. Superior Plus Corp | Kaiser Aluminum vs. NMI Holdings |
| Century Aluminum vs. PKSHA TECHNOLOGY INC | Century Aluminum vs. Ribbon Communications | Century Aluminum vs. Verizon Communications | Century Aluminum vs. Align Technology |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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