Correlation Between Century Aluminum and East Africa

Specify exactly 2 symbols:
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 Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.44%
ValuesDaily Returns

Century Aluminum  vs.  East Africa Metals

 Performance 
       Timeline  
Century Aluminum 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 14 (%) 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.
East Africa Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 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.
The idea behind Century Aluminum and East Africa Metals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

Other Complementary Tools

Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk