Correlation Between AngloGold Ashanti and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both AngloGold Ashanti 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 AngloGold Ashanti and Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AngloGold Ashanti plc and Century Aluminum, you can compare the effects of market volatilities on AngloGold Ashanti 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 AngloGold Ashanti with a short position of Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of AngloGold Ashanti and Century Aluminum.
Diversification Opportunities for AngloGold Ashanti and Century Aluminum
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AngloGold and Century is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AngloGold Ashanti plc and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum and AngloGold Ashanti 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 AngloGold Ashanti plc 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 AngloGold Ashanti i.e., AngloGold Ashanti and Century Aluminum go up and down completely randomly.
Pair Corralation between AngloGold Ashanti and Century Aluminum
Allowing for the 90-day total investment horizon AngloGold Ashanti is expected to generate 6.92 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, AngloGold Ashanti plc is 1.11 times less risky than Century Aluminum. It trades about 0.06 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,388 in Century Aluminum on January 25, 2024 and sell it today you would earn a total of 351.00 from holding Century Aluminum or generate 25.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AngloGold Ashanti plc vs. Century Aluminum
Performance |
| Timeline |
| AngloGold Ashanti plc |
| Century Aluminum |
AngloGold Ashanti and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AngloGold Ashanti and Century Aluminum
The main advantage of trading using opposite AngloGold Ashanti and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AngloGold Ashanti 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 AngloGold Ashanti plc 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.| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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