Correlation Between Grupo Simec and Century Aluminum

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

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

Diversification Opportunities for Grupo Simec and Century Aluminum

-0.54

Correlation Coefficient

Grupo Simec  Century Aluminum

Excellent diversification

The 3 months correlation between Grupo and Century is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Simec SAB and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and Grupo Simec 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 Grupo Simec SAB 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 Grupo Simec i.e., Grupo Simec and Century Aluminum go up and down completely randomly.

Pair Corralation between Grupo Simec and Century Aluminum

Considering the 90-day investment horizon Grupo Simec SAB is expected to under-perform the Century Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Simec SAB is 1.35 times less risky than Century Aluminum. The stock trades about -0.01 of its potential returns per unit of risk. The Century Aluminum is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,364  in Century Aluminum on September 13, 2024 and sell it today you would earn a total of  779.00  from holding Century Aluminum or generate 57.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.94%
Values	Daily Returns

Grupo Simec SAB  vs.  Century Aluminum

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Simec SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Century Aluminum

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Aluminum are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Century Aluminum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Simec and Century Aluminum

The main advantage of trading using opposite Grupo Simec and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Simec 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 Grupo Simec SAB 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.