Correlation Between Alcoa Corp and Allegheny Technologies
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Allegheny Technologies 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 Allegheny Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Allegheny Technologies Incorporated, you can compare the effects of market volatilities on Alcoa Corp and Allegheny Technologies 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 Allegheny Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Allegheny Technologies.
Diversification Opportunities for Alcoa Corp and Allegheny Technologies
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alcoa and Allegheny is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies 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 Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Allegheny Technologies go up and down completely randomly.
Pair Corralation between Alcoa Corp and Allegheny Technologies
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.95 times more return on investment than Allegheny Technologies. However, Alcoa Corp is 1.95 times more volatile than Allegheny Technologies Incorporated. It trades about 0.3 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about 0.23 per unit of risk. If you would invest 3,103 in Alcoa Corp on January 17, 2024 and sell it today you would earn a total of 554.00 from holding Alcoa Corp or generate 17.85% 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. Allegheny Technologies Incorpo
Performance |
| Timeline |
| Alcoa Corp |
| Allegheny Technologies |
Alcoa Corp and Allegheny Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Allegheny Technologies
The main advantage of trading using opposite Alcoa Corp and Allegheny Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Allegheny Technologies 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 Allegheny Technologies will offset losses from the drop in Allegheny Technologies' long position.| Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Norsk Hydro ASA | Alcoa Corp vs. Aquagold International | Alcoa Corp vs. Thrivent High Yield |
| Allegheny Technologies vs. Northwest Pipe | Allegheny Technologies vs. Insteel Industries | Allegheny Technologies vs. ESAB Corp | Allegheny Technologies vs. Gulf Island Fabrication |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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