Correlation Between Constellium and Celanese
Can any of the company-specific risk be diversified away by investing in both Constellium and Celanese 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 Constellium and Celanese into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellium Nv and Celanese, you can compare the effects of market volatilities on Constellium and Celanese 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 Constellium with a short position of Celanese. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and Celanese.
Diversification Opportunities for Constellium and Celanese
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Constellium and Celanese is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Celanese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celanese and Constellium 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 Constellium Nv are associated (or correlated) with Celanese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celanese has no effect on the direction of Constellium i.e., Constellium and Celanese go up and down completely randomly.
Pair Corralation between Constellium and Celanese
Given the investment horizon of 90 days Constellium Nv is expected to generate 1.23 times more return on investment than Celanese. However, Constellium is 1.23 times more volatile than Celanese. It trades about 0.04 of its potential returns per unit of risk. Celanese is currently generating about 0.02 per unit of risk. If you would invest 1,573 in Constellium Nv on January 25, 2024 and sell it today you would earn a total of 560.00 from holding Constellium Nv or generate 35.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellium Nv vs. Celanese
Performance |
| Timeline |
| Constellium Nv |
| Celanese |
Constellium and Celanese Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellium and Celanese
The main advantage of trading using opposite Constellium and Celanese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium position performs unexpectedly, Celanese 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 Celanese will offset losses from the drop in Celanese's long position.The idea behind Constellium Nv and Celanese 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.| Celanese vs. Huntsman | Celanese vs. Lsb Industries | Celanese vs. Westlake Chemical Partners | Celanese vs. Green Plains Renewable |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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