Correlation Between CPU SOFTWAREHOUSE and Kaiser Aluminum

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

By analyzing existing cross correlation between CPU SOFTWAREHOUSE and Kaiser Aluminum, you can compare the effects of market volatilities on CPU SOFTWAREHOUSE and Kaiser Aluminum 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 CPU SOFTWAREHOUSE with a short position of Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPU SOFTWAREHOUSE and Kaiser Aluminum.

Diversification Opportunities for CPU SOFTWAREHOUSE and Kaiser Aluminum

-0.47

Correlation Coefficient

CPU SOFTWAREHOUSE  Kaiser Aluminum

Very good diversification

The 3 months correlation between CPU and Kaiser is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CPU SOFTWAREHOUSE and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE are associated (or correlated) with Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of CPU SOFTWAREHOUSE i.e., CPU SOFTWAREHOUSE and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between CPU SOFTWAREHOUSE and Kaiser Aluminum

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to under-perform the Kaiser Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, CPU SOFTWAREHOUSE is 1.1 times less risky than Kaiser Aluminum. The stock trades about -0.01 of its potential returns per unit of risk. The Kaiser Aluminum is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,618  in Kaiser Aluminum on August 31, 2024 and sell it today you would earn a total of  882.00  from holding Kaiser Aluminum or generate 13.33% return on investment over 90 days.

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

CPU SOFTWAREHOUSE  vs.  Kaiser Aluminum

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPU SOFTWAREHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CPU SOFTWAREHOUSE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Kaiser Aluminum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CPU SOFTWAREHOUSE and Kaiser Aluminum

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

The idea behind CPU SOFTWAREHOUSE and Kaiser Aluminum 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.