Correlation Between Gold Fields and Century Aluminum

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

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

Diversification Opportunities for Gold Fields and Century Aluminum

-0.38

Correlation Coefficient

Gold Fields  Century Aluminum

Very good diversification

The 3 months correlation between Gold and Century is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Gold Fields i.e., Gold Fields and Century Aluminum go up and down completely randomly.

Pair Corralation between Gold Fields and Century Aluminum

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 0.72 times more return on investment than Century Aluminum. However, Gold Fields Ltd is 1.38 times less risky than Century Aluminum. It trades about 0.02 of its potential returns per unit of risk. Century Aluminum is currently generating about -0.16 per unit of risk. If you would invest  1,469  in Gold Fields Ltd on October 13, 2024 and sell it today you would earn a total of  4.00  from holding Gold Fields Ltd or generate 0.27% return on investment over 90 days.

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

Gold Fields Ltd  vs.  Century Aluminum

Gold Fields

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Fields Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Gold Fields is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with Gold Fields and Century Aluminum

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

The idea behind Gold Fields Ltd and Century 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.