Correlation Between Kaiser Aluminum and CleanGo Innovations

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

By analyzing existing cross correlation between Kaiser Aluminum and CleanGo Innovations, you can compare the effects of market volatilities on Kaiser Aluminum and CleanGo Innovations 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 CleanGo Innovations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and CleanGo Innovations.

Diversification Opportunities for Kaiser Aluminum and CleanGo Innovations

0.12

Correlation Coefficient

Kaiser Aluminum  CleanGo Innovations

Average diversification

The 3 months correlation between Kaiser and CleanGo is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and CleanGo Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanGo Innovations 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 CleanGo Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanGo Innovations has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and CleanGo Innovations go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and CleanGo Innovations

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 38.42 times less return on investment than CleanGo Innovations. But when comparing it to its historical volatility, Kaiser Aluminum is 20.07 times less risky than CleanGo Innovations. It trades about 0.03 of its potential returns per unit of risk. CleanGo Innovations is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  32.00  in CleanGo Innovations on December 20, 2024 and sell it today you would lose (20.00) from holding CleanGo Innovations or give up 62.5% of portfolio value over 90 days.

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

Kaiser Aluminum  vs.  CleanGo Innovations

Kaiser Aluminum

Risk-Adjusted Performance

Weak

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. 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.

CleanGo Innovations

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CleanGo Innovations are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CleanGo Innovations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaiser Aluminum and CleanGo Innovations

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

The idea behind Kaiser Aluminum and CleanGo Innovations 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.