Correlation Between Kaiser Aluminum and Henderson Investment

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Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum and Henderson Investment 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 Henderson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Henderson Investment Ltd, you can compare the effects of market volatilities on Kaiser Aluminum and Henderson Investment 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 Henderson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Henderson Investment.

Diversification Opportunities for Kaiser Aluminum and Henderson Investment

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Kaiser and Henderson is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Henderson Investment Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henderson Investment 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 Henderson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henderson Investment has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Henderson Investment go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Henderson Investment

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 60.9 times less return on investment than Henderson Investment. But when comparing it to its historical volatility, Kaiser Aluminum is 7.12 times less risky than Henderson Investment. It trades about 0.0 of its potential returns per unit of risk. Henderson Investment Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Henderson Investment Ltd on October 10, 2024 and sell it today you would lose (18.50) from holding Henderson Investment Ltd or give up 84.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Kaiser Aluminum  vs.  Henderson Investment Ltd

 Performance 
       Timeline  
Kaiser Aluminum 

Risk-Adjusted Performance

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Weak
 
Strong
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.
Henderson Investment 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Henderson Investment Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kaiser Aluminum and Henderson Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kaiser Aluminum and Henderson Investment

The main advantage of trading using opposite Kaiser Aluminum and Henderson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum position performs unexpectedly, Henderson Investment 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 Henderson Investment will offset losses from the drop in Henderson Investment's long position.
The idea behind Kaiser Aluminum and Henderson Investment Ltd 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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