Correlation Between Century Aluminum and Ultra Clean

Can any of the company-specific risk be diversified away by investing in both Century Aluminum and Ultra Clean 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 Ultra Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Century Aluminum and Ultra Clean Holdings, you can compare the effects of market volatilities on Century Aluminum and Ultra Clean 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 Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and Ultra Clean.

Diversification Opportunities for Century Aluminum and Ultra Clean

0.3

Correlation Coefficient

Century Aluminum  Ultra Clean

Weak diversification

The 3 months correlation between Century and Ultra is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings 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 Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of Century Aluminum i.e., Century Aluminum and Ultra Clean go up and down completely randomly.

Pair Corralation between Century Aluminum and Ultra Clean

Given the investment horizon of 90 days Century Aluminum is expected to generate 1.3 times more return on investment than Ultra Clean. However, Century Aluminum is 1.3 times more volatile than Ultra Clean Holdings. It trades about 0.06 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about -0.02 per unit of risk. If you would invest  1,722  in Century Aluminum on September 13, 2024 and sell it today you would earn a total of  420.00  from holding Century Aluminum or generate 24.39% return on investment over 90 days.

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

Century Aluminum  vs.  Ultra Clean Holdings

Century Aluminum

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Century Aluminum showed solid returns over the last few months and may actually be approaching a breakup point.

Ultra Clean Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Ultra Clean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Century Aluminum and Ultra Clean

The main advantage of trading using opposite Century Aluminum and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, Ultra Clean 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 Ultra Clean will offset losses from the drop in Ultra Clean's long position.

The idea behind Century Aluminum and Ultra Clean Holdings 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.