Correlation Between Alcoa Corp and Hawaiian Holdings
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Hawaiian Holdings 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 Alcoa Corp and Hawaiian Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Hawaiian Holdings, you can compare the effects of market volatilities on Alcoa Corp and Hawaiian Holdings 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 Alcoa Corp with a short position of Hawaiian Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Hawaiian Holdings.
Diversification Opportunities for Alcoa Corp and Hawaiian Holdings
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alcoa and Hawaiian is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Hawaiian Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaiian Holdings and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Hawaiian Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaiian Holdings has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Hawaiian Holdings go up and down completely randomly.
Pair Corralation between Alcoa Corp and Hawaiian Holdings
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.89 times more return on investment than Hawaiian Holdings. However, Alcoa Corp is 2.89 times more volatile than Hawaiian Holdings. It trades about 0.12 of its potential returns per unit of risk. Hawaiian Holdings is currently generating about -0.14 per unit of risk. If you would invest 2,965 in Alcoa Corp on January 24, 2024 and sell it today you would earn a total of 670.00 from holding Alcoa Corp or generate 22.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Hawaiian Holdings
Performance |
| Timeline |
| Alcoa Corp |
| Hawaiian Holdings |
Alcoa Corp and Hawaiian Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Hawaiian Holdings
The main advantage of trading using opposite Alcoa Corp and Hawaiian Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Hawaiian Holdings 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 Hawaiian Holdings will offset losses from the drop in Hawaiian Holdings' long position.The idea behind Alcoa Corp and Hawaiian Holdings 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.| Hawaiian Holdings vs. Southwest Airlines | Hawaiian Holdings vs. JetBlue Airways Corp | Hawaiian Holdings vs. United Airlines Holdings | Hawaiian Holdings vs. Delta Air Lines |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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