Correlation Between Aluminum and Century Aluminum

Can any of the company-specific risk be diversified away by investing in both 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 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 Aluminum of and Century Aluminum, you can compare the effects of market volatilities on 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 Aluminum with a short position of Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum and Century Aluminum.

Diversification Opportunities for Aluminum and Century Aluminum

-0.58

Correlation Coefficient

Aluminum  Century Aluminum

Excellent diversification

The 3 months correlation between Aluminum and Century is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and 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 Aluminum of 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 Aluminum i.e., Aluminum and Century Aluminum go up and down completely randomly.

Pair Corralation between Aluminum and Century Aluminum

Assuming the 90 days horizon Aluminum of is expected to generate 1.37 times more return on investment than Century Aluminum. However, Aluminum is 1.37 times more volatile than Century Aluminum. It trades about -0.11 of its potential returns per unit of risk. Century Aluminum is currently generating about -0.38 per unit of risk. If you would invest  58.00  in Aluminum of on October 1, 2024 and sell it today you would lose (5.00) from holding Aluminum of or give up 8.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aluminum of  vs.  Century Aluminum

Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aluminum of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Century Aluminum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Century Aluminum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aluminum and Century Aluminum

The main advantage of trading using opposite Aluminum and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 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.

The idea behind Aluminum of and Century Aluminum pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.