Correlation Between Fair Isaac and Kaiser Aluminum

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

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

Diversification Opportunities for Fair Isaac and Kaiser Aluminum

0.89

Correlation Coefficient

Fair Isaac  Kaiser Aluminum

Very poor diversification

The 3 months correlation between Fair and Kaiser is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac Corp and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum and Fair Isaac 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 Fair Isaac Corp 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 Fair Isaac i.e., Fair Isaac and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between Fair Isaac and Kaiser Aluminum

Assuming the 90 days trading horizon Fair Isaac Corp is expected to generate 0.81 times more return on investment than Kaiser Aluminum. However, Fair Isaac Corp is 1.24 times less risky than Kaiser Aluminum. It trades about 0.12 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.05 per unit of risk. If you would invest  105,000  in Fair Isaac Corp on September 27, 2024 and sell it today you would earn a total of  94,900  from holding Fair Isaac Corp or generate 90.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fair Isaac Corp  vs.  Kaiser Aluminum

Fair Isaac Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kaiser Aluminum

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fair Isaac and Kaiser Aluminum

The main advantage of trading using opposite Fair Isaac and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Isaac 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 Fair Isaac Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.