Correlation Between THRACE PLASTICS and Kaiser Aluminum

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

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

Diversification Opportunities for THRACE PLASTICS and Kaiser Aluminum

0.5

Correlation Coefficient

THRACE PLASTICS  Kaiser Aluminum

Very weak diversification

The 3 months correlation between THRACE and Kaiser is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding THRACE PLASTICS and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum and THRACE PLASTICS 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 THRACE PLASTICS are associated (or correlated) with Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of THRACE PLASTICS i.e., THRACE PLASTICS and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between THRACE PLASTICS and Kaiser Aluminum

Assuming the 90 days trading horizon THRACE PLASTICS is expected to generate 14.04 times less return on investment than Kaiser Aluminum. But when comparing it to its historical volatility, THRACE PLASTICS is 1.83 times less risky than Kaiser Aluminum. It trades about 0.05 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  4,599  in Kaiser Aluminum on April 20, 2025 and sell it today you would earn a total of  2,951  from holding Kaiser Aluminum or generate 64.17% return on investment over 90 days.

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

THRACE PLASTICS  vs.  Kaiser Aluminum

THRACE PLASTICS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in THRACE PLASTICS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, THRACE PLASTICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Kaiser Aluminum

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Kaiser Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with THRACE PLASTICS and Kaiser Aluminum

The main advantage of trading using opposite THRACE PLASTICS and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THRACE PLASTICS position performs unexpectedly, Kaiser 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.

The idea behind THRACE PLASTICS and Kaiser 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.