Correlation Between Century Aluminum and Dow

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

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

Diversification Opportunities for Century Aluminum and Dow

0.04

Correlation Coefficient

Century Aluminum  Dow

Significant diversification

The 3 months correlation between Century and Dow is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of Century Aluminum i.e., Century Aluminum and Dow go up and down completely randomly.

Pair Corralation between Century Aluminum and Dow

Given the investment horizon of 90 days Century Aluminum is expected to generate 2.47 times more return on investment than Dow. However, Century Aluminum is 2.47 times more volatile than Dow Inc. It trades about 0.04 of its potential returns per unit of risk. Dow Inc is currently generating about -0.07 per unit of risk. If you would invest  1,823  in Century Aluminum on December 28, 2024 and sell it today you would earn a total of  92.00  from holding Century Aluminum or generate 5.05% return on investment over 90 days.

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

Century Aluminum  vs.  Dow Inc

Century Aluminum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 3 (%) 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.

Dow Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dow Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Century Aluminum and Dow

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

The idea behind Century Aluminum and Dow Inc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.