Correlation Between Celanese and Constellium
Can any of the company-specific risk be diversified away by investing in both Celanese and Constellium 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 Celanese and Constellium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Celanese and Constellium Nv, you can compare the effects of market volatilities on Celanese and Constellium 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 Celanese with a short position of Constellium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Celanese and Constellium.
Diversification Opportunities for Celanese and Constellium
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Celanese and Constellium is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Celanese and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv and Celanese 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 Celanese are associated (or correlated) with Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of Celanese i.e., Celanese and Constellium go up and down completely randomly.
Pair Corralation between Celanese and Constellium
Allowing for the 90-day total investment horizon Celanese is expected to generate 1.92 times less return on investment than Constellium. But when comparing it to its historical volatility, Celanese is 1.24 times less risky than Constellium. It trades about 0.02 of its potential returns per unit of risk. Constellium Nv is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,623 in Constellium Nv on January 26, 2024 and sell it today you would earn a total of 376.00 from holding Constellium Nv or generate 23.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Celanese vs. Constellium Nv
Performance |
| Timeline |
| Celanese |
| Constellium Nv |
Celanese and Constellium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Celanese and Constellium
The main advantage of trading using opposite Celanese and Constellium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celanese position performs unexpectedly, Constellium 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 Constellium will offset losses from the drop in Constellium's long position.The idea behind Celanese and Constellium Nv 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.| Constellium vs. Century Aluminum | Constellium vs. Alcoa Corp | Constellium vs. China Hongqiao Group | Constellium vs. Alumina Limited PK |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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