Correlation Between Century Aluminum and Blue Moon

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

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

Diversification Opportunities for Century Aluminum and Blue Moon

0.62

Correlation Coefficient

Century Aluminum  Blue Moon

Poor diversification

The 3 months correlation between Century and Blue is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Blue Moon Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Moon 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 Blue Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Moon Metals has no effect on the direction of Century Aluminum i.e., Century Aluminum and Blue Moon go up and down completely randomly.

Pair Corralation between Century Aluminum and Blue Moon

Given the investment horizon of 90 days Century Aluminum is expected to under-perform the Blue Moon. In addition to that, Century Aluminum is 2.77 times more volatile than Blue Moon Metals. It trades about -0.39 of its total potential returns per unit of risk. Blue Moon Metals is currently generating about 0.22 per unit of volatility. If you would invest  24.00  in Blue Moon Metals on September 27, 2024 and sell it today you would earn a total of  1.00  from holding Blue Moon Metals or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Century Aluminum  vs.  Blue Moon Metals

Century Aluminum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 6 (%) 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.

Blue Moon Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Moon Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Blue Moon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Century Aluminum and Blue Moon

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

The idea behind Century Aluminum and Blue Moon 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.