Correlation Between Century Aluminum and Noranda Aluminum
Can any of the company-specific risk be diversified away by investing in both Century Aluminum and Noranda 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 Century Aluminum and Noranda Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Aluminum and Noranda Aluminum Holding, you can compare the effects of market volatilities on Century Aluminum and Noranda 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 Century Aluminum with a short position of Noranda Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Aluminum and Noranda Aluminum.
Diversification Opportunities for Century Aluminum and Noranda Aluminum
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Century and Noranda is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Century Aluminum and Noranda Aluminum Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noranda Aluminum Holding and Century 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 Century Aluminum are associated (or correlated) with Noranda Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noranda Aluminum Holding has no effect on the direction of Century Aluminum i.e., Century Aluminum and Noranda Aluminum go up and down completely randomly.
Pair Corralation between Century Aluminum and Noranda Aluminum
Given the investment horizon of 90 days Century Aluminum is expected to generate 0.64 times more return on investment than Noranda Aluminum. However, Century Aluminum is 1.55 times less risky than Noranda Aluminum. It trades about 0.03 of its potential returns per unit of risk. Noranda Aluminum Holding is currently generating about -0.07 per unit of risk. If you would invest 1,379 in Century Aluminum on February 6, 2024 and sell it today you would earn a total of 364.00 from holding Century Aluminum or generate 26.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 36.97% |
Values | Daily Returns |
Century Aluminum vs. Noranda Aluminum Holding
Performance |
Timeline |
Century Aluminum |
Noranda Aluminum Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Century Aluminum and Noranda Aluminum Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Century Aluminum and Noranda Aluminum
The main advantage of trading using opposite Century Aluminum and Noranda Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Aluminum position performs unexpectedly, Noranda 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 Noranda Aluminum will offset losses from the drop in Noranda Aluminum's long position.Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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