Correlation Between Kaiser Aluminum and Celanese

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

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

Diversification Opportunities for Kaiser Aluminum and Celanese

0.81

Correlation Coefficient

Kaiser Aluminum  Celanese

Very poor diversification

The 3 months correlation between Kaiser and Celanese is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Celanese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celanese and Kaiser 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Celanese go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Celanese

Given the investment horizon of 90 days Kaiser Aluminum is expected to generate 1.03 times more return on investment than Celanese. However, Kaiser Aluminum is 1.03 times more volatile than Celanese. It trades about 0.12 of its potential returns per unit of risk. Celanese is currently generating about -0.22 per unit of risk. If you would invest  8,406  in Kaiser Aluminum on January 25, 2024 and sell it today you would earn a total of  346.00  from holding Kaiser Aluminum or generate 4.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Kaiser Aluminum  vs.  Celanese

Kaiser Aluminum

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Kaiser Aluminum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Celanese

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Celanese are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Celanese may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Kaiser Aluminum and Celanese

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

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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.