Correlation Between Kaiser Aluminum and GENERAL

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

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

Diversification Opportunities for Kaiser Aluminum and GENERAL

0.2

Correlation Coefficient

Kaiser Aluminum  GENERAL

Modest diversification

The 3 months correlation between Kaiser and GENERAL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and GENERAL go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and GENERAL

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 2.95 times less return on investment than GENERAL. In addition to that, Kaiser Aluminum is 1.6 times more volatile than GENERAL ELEC CAP. It trades about 0.0 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.01 per unit of volatility. If you would invest  9,963  in GENERAL ELEC CAP on October 26, 2024 and sell it today you would earn a total of  125.00  from holding GENERAL ELEC CAP or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.14%
Values	Daily Returns

Kaiser Aluminum  vs.  GENERAL ELEC CAP

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kaiser Aluminum and GENERAL

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

The idea behind Kaiser Aluminum and GENERAL ELEC CAP 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.