Correlation Between Century Aluminum and Canopy Growth

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

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

Diversification Opportunities for Century Aluminum and Canopy Growth

-0.53

Correlation Coefficient

Century Aluminum  Canopy Growth

Excellent diversification

The 3 months correlation between Century and Canopy is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Century Aluminum i.e., Century Aluminum and Canopy Growth go up and down completely randomly.

Pair Corralation between Century Aluminum and Canopy Growth

Given the investment horizon of 90 days Century Aluminum is expected to generate 0.37 times more return on investment than Canopy Growth. However, Century Aluminum is 2.69 times less risky than Canopy Growth. It trades about 0.09 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about 0.03 per unit of risk. If you would invest  858.00  in Century Aluminum on August 31, 2024 and sell it today you would earn a total of  1,425  from holding Century Aluminum or generate 166.08% return on investment over 90 days.

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

Century Aluminum  vs.  Canopy Growth Corp

Century Aluminum

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish basic indicators, Century Aluminum showed solid returns over the last few months and may actually be approaching a breakup point.

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canopy Growth Corp 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Century Aluminum and Canopy Growth

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

The idea behind Century Aluminum and Canopy Growth Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.