Correlation Between Aluminum and 90331HPL1

Can any of the company-specific risk be diversified away by investing in both Aluminum and 90331HPL1 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 Aluminum and 90331HPL1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aluminum of and US BANK NATIONAL, you can compare the effects of market volatilities on Aluminum and 90331HPL1 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 Aluminum with a short position of 90331HPL1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum and 90331HPL1.

Diversification Opportunities for Aluminum and 90331HPL1

0.3

Correlation Coefficient

Aluminum  90331HPL1

Weak diversification

The 3 months correlation between Aluminum and 90331HPL1 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and US BANK NATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US BANK NATIONAL and 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 Aluminum of are associated (or correlated) with 90331HPL1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US BANK NATIONAL has no effect on the direction of Aluminum i.e., Aluminum and 90331HPL1 go up and down completely randomly.

Pair Corralation between Aluminum and 90331HPL1

Assuming the 90 days horizon Aluminum is expected to generate 42.28 times less return on investment than 90331HPL1. But when comparing it to its historical volatility, Aluminum of is 19.8 times less risky than 90331HPL1. It trades about 0.04 of its potential returns per unit of risk. US BANK NATIONAL is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,568  in US BANK NATIONAL on October 10, 2024 and sell it today you would lose (21.00) from holding US BANK NATIONAL or give up 0.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.46%
Values	Daily Returns

Aluminum of  vs.  US BANK NATIONAL

Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aluminum of 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

US BANK NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for US BANK NATIONAL investors.

Pair Trading with Aluminum and 90331HPL1

The main advantage of trading using opposite Aluminum and 90331HPL1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminum position performs unexpectedly, 90331HPL1 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 90331HPL1 will offset losses from the drop in 90331HPL1's long position.

The idea behind Aluminum of and US BANK NATIONAL 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.