Correlation Between Kaiser Aluminum and KRISPY KREME

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

By analyzing existing cross correlation between Kaiser Aluminum and KRISPY KREME DL 01, you can compare the effects of market volatilities on Kaiser Aluminum and KRISPY KREME 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 KRISPY KREME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and KRISPY KREME.

Diversification Opportunities for Kaiser Aluminum and KRISPY KREME

0.11

Correlation Coefficient

Kaiser Aluminum  KRISPY KREME

Average diversification

The 3 months correlation between Kaiser and KRISPY is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and KRISPY KREME DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRISPY KREME DL 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 KRISPY KREME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRISPY KREME DL has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and KRISPY KREME go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and KRISPY KREME

Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 1.15 times more return on investment than KRISPY KREME. However, Kaiser Aluminum is 1.15 times more volatile than KRISPY KREME DL 01. It trades about 0.1 of its potential returns per unit of risk. KRISPY KREME DL 01 is currently generating about -0.08 per unit of risk. If you would invest  6,174  in Kaiser Aluminum on September 18, 2024 and sell it today you would earn a total of  976.00  from holding Kaiser Aluminum or generate 15.81% return on investment over 90 days.

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

Kaiser Aluminum  vs.  KRISPY KREME DL 01

Kaiser Aluminum

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

KRISPY KREME DL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KRISPY KREME DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Kaiser Aluminum and KRISPY KREME

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

The idea behind Kaiser Aluminum and KRISPY KREME DL 01 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.