Correlation Between Century Aluminum and Aluminumof China

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

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

Diversification Opportunities for Century Aluminum and Aluminumof China

-0.42

Correlation Coefficient

Century Aluminum  Aluminumof China

Very good diversification

The 3 months correlation between Century and Aluminumof is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China 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 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 Century Aluminum i.e., Century Aluminum and Aluminumof China go up and down completely randomly.

Pair Corralation between Century Aluminum and Aluminumof China

Assuming the 90 days horizon Century Aluminum is expected to under-perform the Aluminumof China. But the stock apears to be less risky and, when comparing its historical volatility, Century Aluminum is 1.26 times less risky than Aluminumof China. The stock trades about -0.2 of its potential returns per unit of risk. The Aluminum of is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Aluminum of on October 13, 2024 and sell it today you would lose (1.00) from holding Aluminum of or give up 1.75% of portfolio value over 90 days.

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

Century Aluminum  vs.  Aluminum of

Century Aluminum

Risk-Adjusted Performance

6 of 100

Modest

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

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Century Aluminum and Aluminumof China

The main advantage of trading using opposite Century Aluminum and Aluminumof China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum 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 Century Aluminum 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.