Correlation Between Century Aluminum and Royal Gold

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Can any of the company-specific risk be diversified away by investing in both Century Aluminum and Royal Gold 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 Royal Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and Royal Gold, you can compare the effects of market volatilities on Century Aluminum and Royal Gold 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 Royal Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and Royal Gold.

Diversification Opportunities for Century Aluminum and Royal Gold

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Century and Royal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Royal Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Gold 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 Royal Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Gold has no effect on the direction of Century Aluminum i.e., Century Aluminum and Royal Gold go up and down completely randomly.

Pair Corralation between Century Aluminum and Royal Gold

Given the investment horizon of 90 days Century Aluminum is expected to generate 2.71 times more return on investment than Royal Gold. However, Century Aluminum is 2.71 times more volatile than Royal Gold. It trades about 0.05 of its potential returns per unit of risk. Royal Gold is currently generating about 0.04 per unit of risk. If you would invest  1,591  in Century Aluminum on September 25, 2024 and sell it today you would earn a total of  311.00  from holding Century Aluminum or generate 19.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Century Aluminum  vs.  Royal Gold

 Performance 
       Timeline  
Century Aluminum 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 7 (%) 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.
Royal Gold 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Royal Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Century Aluminum and Royal Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Century Aluminum and Royal Gold

The main advantage of trading using opposite Century Aluminum and Royal Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, Royal Gold 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 Royal Gold will offset losses from the drop in Royal Gold's long position.
The idea behind Century Aluminum and Royal Gold 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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