Correlation Between Kaiser Aluminum and SPARTAN STORES

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

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

Diversification Opportunities for Kaiser Aluminum and SPARTAN STORES

-0.05

Correlation Coefficient

Kaiser Aluminum  SPARTAN STORES

Good diversification

The 3 months correlation between Kaiser and SPARTAN is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and SPARTAN STORES go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and SPARTAN STORES

Assuming the 90 days trading horizon Kaiser Aluminum is expected to under-perform the SPARTAN STORES. But the stock apears to be less risky and, when comparing its historical volatility, Kaiser Aluminum is 1.13 times less risky than SPARTAN STORES. The stock trades about -0.01 of its potential returns per unit of risk. The SPARTAN STORES is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,830  in SPARTAN STORES on December 22, 2024 and sell it today you would earn a total of  0.00  from holding SPARTAN STORES or generate 0.0% return on investment over 90 days.

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

Kaiser Aluminum  vs.  SPARTAN STORES

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kaiser Aluminum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPARTAN STORES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, SPARTAN STORES is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kaiser Aluminum and SPARTAN STORES

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

The idea behind Kaiser Aluminum and SPARTAN STORES 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.