Correlation Between Ralph Lauren and Century Aluminum

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

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

Diversification Opportunities for Ralph Lauren and Century Aluminum

0.26

Correlation Coefficient

Ralph Lauren  Century Aluminum

Modest diversification

The 3 months correlation between Ralph and Century is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and Ralph Lauren 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 Ralph Lauren Corp are associated (or correlated) with Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Century Aluminum go up and down completely randomly.

Pair Corralation between Ralph Lauren and Century Aluminum

Allowing for the 90-day total investment horizon Ralph Lauren is expected to generate 1.85 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, Ralph Lauren Corp is 1.95 times less risky than Century Aluminum. It trades about 0.02 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,899  in Century Aluminum on December 25, 2024 and sell it today you would lose (8.00) from holding Century Aluminum or give up 0.42% of portfolio value over 90 days.

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

Ralph Lauren Corp  vs.  Century Aluminum

Ralph Lauren Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Ralph Lauren is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Century Aluminum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Century Aluminum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ralph Lauren and Century Aluminum

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

The idea behind Ralph Lauren Corp and Century Aluminum 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.