Correlation Between Century Aluminum and East Africa
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and East Africa 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 Century Aluminum and East Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and East Africa Metals, you can compare the effects of market volatilities on Century Aluminum and East Africa 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 Century Aluminum with a short position of East Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and East Africa.
Diversification Opportunities for Century Aluminum and East Africa
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Century and East is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals and Century 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 Century Aluminum are associated (or correlated) with East Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of Century Aluminum i.e., Century Aluminum and East Africa go up and down completely randomly.
Pair Corralation between Century Aluminum and East Africa
Given the investment horizon of 90 days Century Aluminum is expected to generate 1.39 times more return on investment than East Africa. However, Century Aluminum is 1.39 times more volatile than East Africa Metals. It trades about 0.19 of its potential returns per unit of risk. East Africa Metals is currently generating about -0.16 per unit of risk. If you would invest 1,420 in Century Aluminum on September 14, 2024 and sell it today you would earn a total of 722.00 from holding Century Aluminum or generate 50.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 98.44% |
Values | Daily Returns |
Century Aluminum vs. East Africa Metals
Performance |
Timeline |
Century Aluminum |
East Africa Metals |
Century Aluminum and East Africa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Century Aluminum and East Africa
The main advantage of trading using opposite Century Aluminum and East Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, East Africa 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 East Africa will offset losses from the drop in East Africa's long position.Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
East Africa vs. Pasinex Resources Limited | East Africa vs. Commander Resources | East Africa vs. Forsys Metals Corp | East Africa vs. American CuMo Mining |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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