Correlation Between Alcoa Corp and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Home Bancorp 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 Home Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Home Bancorp, you can compare the effects of market volatilities on Alcoa Corp and Home Bancorp 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 Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Home Bancorp.
Diversification Opportunities for Alcoa Corp and Home Bancorp
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alcoa and Home is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp 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 Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Home Bancorp go up and down completely randomly.
Pair Corralation between Alcoa Corp and Home Bancorp
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.49 times more return on investment than Home Bancorp. However, Alcoa Corp is 1.49 times more volatile than Home Bancorp. It trades about 0.19 of its potential returns per unit of risk. Home Bancorp is currently generating about 0.08 per unit of risk. If you would invest 2,995 in Alcoa Corp on March 14, 2024 and sell it today you would earn a total of 1,026 from holding Alcoa Corp or generate 34.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alcoa Corp vs. Home Bancorp
Performance |
Timeline |
Alcoa Corp |
Home Bancorp |
Alcoa Corp and Home Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alcoa Corp and Home Bancorp
The main advantage of trading using opposite Alcoa Corp and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Home Bancorp 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 Home Bancorp will offset losses from the drop in Home Bancorp's long position.The idea behind Alcoa Corp and Home Bancorp 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.Home Bancorp vs. HMN Financial | Home Bancorp vs. Cullman Bancorp | Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Lake Shore Bancorp |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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