Correlation Between Century Aluminum and 019736AG2

Can any of the company-specific risk be diversified away by investing in both Century Aluminum and 019736AG2 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 019736AG2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Century Aluminum and US019736AG29, you can compare the effects of market volatilities on Century Aluminum and 019736AG2 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 019736AG2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and 019736AG2.

Diversification Opportunities for Century Aluminum and 019736AG2

0.49

Correlation Coefficient

Century Aluminum  019736AG2

Very weak diversification

The 3 months correlation between Century and 019736AG2 is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and US019736AG29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US019736AG29 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 019736AG2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US019736AG29 has no effect on the direction of Century Aluminum i.e., Century Aluminum and 019736AG2 go up and down completely randomly.

Pair Corralation between Century Aluminum and 019736AG2

Given the investment horizon of 90 days Century Aluminum is expected to generate 10.95 times less return on investment than 019736AG2. But when comparing it to its historical volatility, Century Aluminum is 12.02 times less risky than 019736AG2. It trades about 0.05 of its potential returns per unit of risk. US019736AG29 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,275  in US019736AG29 on October 6, 2024 and sell it today you would earn a total of  427.00  from holding US019736AG29 or generate 5.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.26%
Values	Daily Returns

Century Aluminum  vs.  US019736AG29

Century Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 4 (%) 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.

US019736AG29

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US019736AG29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 019736AG2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Century Aluminum and 019736AG2

The main advantage of trading using opposite Century Aluminum and 019736AG2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, 019736AG2 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 019736AG2 will offset losses from the drop in 019736AG2's long position.

The idea behind Century Aluminum and US019736AG29 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 Transaction History module to view history of all your transactions and understand their impact on performance.