Correlation Between Kaiser Aluminum and Vestas Wind

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

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

Diversification Opportunities for Kaiser Aluminum and Vestas Wind

-0.93

Correlation Coefficient

Kaiser Aluminum  Vestas Wind

Pay attention - limited upside

The 3 months correlation between Kaiser and Vestas is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Vestas Wind go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Vestas Wind

Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 0.88 times more return on investment than Vestas Wind. However, Kaiser Aluminum is 1.13 times less risky than Vestas Wind. It trades about 0.12 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.23 per unit of risk. If you would invest  6,124  in Kaiser Aluminum on September 13, 2024 and sell it today you would earn a total of  1,326  from holding Kaiser Aluminum or generate 21.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Kaiser Aluminum  vs.  Vestas Wind Systems

Kaiser Aluminum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 9 (%) 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.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kaiser Aluminum and Vestas Wind

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

The idea behind Kaiser Aluminum and Vestas Wind Systems 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.