Correlation Between Century Aluminum and Constellium

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

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

Diversification Opportunities for Century Aluminum and Constellium

-0.07

Correlation Coefficient

Century Aluminum  Constellium

Good diversification

The 3 months correlation between Century and Constellium is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv 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 Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of Century Aluminum i.e., Century Aluminum and Constellium go up and down completely randomly.

Pair Corralation between Century Aluminum and Constellium

Given the investment horizon of 90 days Century Aluminum is expected to generate 1.47 times more return on investment than Constellium. However, Century Aluminum is 1.47 times more volatile than Constellium Nv. It trades about 0.03 of its potential returns per unit of risk. Constellium Nv is currently generating about 0.03 per unit of risk. If you would invest  1,823  in Century Aluminum on December 30, 2024 and sell it today you would earn a total of  33.00  from holding Century Aluminum or generate 1.81% return on investment over 90 days.

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

Century Aluminum  vs.  Constellium Nv

Century Aluminum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Century Aluminum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Constellium Nv

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Constellium Nv are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Constellium may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Century Aluminum and Constellium

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

The idea behind Century Aluminum and Constellium Nv 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.