Correlation Between Constellium and Aluminumof China

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

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

Diversification Opportunities for Constellium and Aluminumof China

0.59

Correlation Coefficient

Constellium  Aluminumof China

Very weak diversification

The 3 months correlation between Constellium and Aluminumof is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China and Constellium 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 Constellium Nv are associated (or correlated) with Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of Constellium i.e., Constellium and Aluminumof China go up and down completely randomly.

Pair Corralation between Constellium and Aluminumof China

Given the investment horizon of 90 days Constellium Nv is expected to under-perform the Aluminumof China. But the stock apears to be less risky and, when comparing its historical volatility, Constellium Nv is 2.08 times less risky than Aluminumof China. The stock trades about -0.02 of its potential returns per unit of risk. The Aluminum of is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Aluminum of on October 24, 2024 and sell it today you would earn a total of  9.00  from holding Aluminum of or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	78.34%
Values	Daily Returns

Constellium Nv  vs.  Aluminum of

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Constellium is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Aluminumof China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aluminum of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Constellium and Aluminumof China

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

The idea behind Constellium Nv and Aluminum of 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..