Correlation Between Value Capital and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Value Capital and Alcoa Corp 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 Value Capital and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Capital One and Alcoa Corp, you can compare the effects of market volatilities on Value Capital and Alcoa Corp 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 Value Capital with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Capital and Alcoa Corp.
Diversification Opportunities for Value Capital and Alcoa Corp
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Value and Alcoa is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Value Capital One and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Value Capital 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 Value Capital One are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Value Capital i.e., Value Capital and Alcoa Corp go up and down completely randomly.
Pair Corralation between Value Capital and Alcoa Corp
Assuming the 90 days trading horizon Value Capital One is expected to under-perform the Alcoa Corp. In addition to that, Value Capital is 1.67 times more volatile than Alcoa Corp. It trades about -0.16 of its total potential returns per unit of risk. Alcoa Corp is currently generating about 0.26 per unit of volatility. If you would invest 3,186 in Alcoa Corp on January 25, 2024 and sell it today you would earn a total of 420.00 from holding Alcoa Corp or generate 13.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Value Capital One vs. Alcoa Corp
Performance |
| Timeline |
| Value Capital One |
| Alcoa Corp |
Value Capital and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Capital and Alcoa Corp
The main advantage of trading using opposite Value Capital and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Capital position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.The idea behind Value Capital One and Alcoa Corp 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.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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