Correlation Between Kaiser Aluminum and Allegheny Technologies

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

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

Diversification Opportunities for Kaiser Aluminum and Allegheny Technologies

-0.43

Correlation Coefficient

Kaiser Aluminum  Allegheny Technologies

Very good diversification

The 3 months correlation between Kaiser and Allegheny is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies and Kaiser 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 Kaiser Aluminum are associated (or correlated) with Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Allegheny Technologies go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Allegheny Technologies

Given the investment horizon of 90 days Kaiser Aluminum is expected to under-perform the Allegheny Technologies. In addition to that, Kaiser Aluminum is 1.34 times more volatile than Allegheny Technologies Incorporated. It trades about -0.51 of its total potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about -0.29 per unit of volatility. If you would invest  6,015  in Allegheny Technologies Incorporated on September 26, 2024 and sell it today you would lose (433.00) from holding Allegheny Technologies Incorporated or give up 7.2% of portfolio value over 90 days.

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

Kaiser Aluminum  vs.  Allegheny Technologies Incorpo

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Allegheny Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegheny Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Kaiser Aluminum and Allegheny Technologies

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

The idea behind Kaiser Aluminum and Allegheny Technologies Incorporated 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.