Correlation Between Alcoa Corp and Alkermes Plc

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Alkermes Plc 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 Alkermes Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and Alkermes Plc, you can compare the effects of market volatilities on Alcoa Corp and Alkermes Plc 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 Alkermes Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Alkermes Plc.

Diversification Opportunities for Alcoa Corp and Alkermes Plc

-0.75

Correlation Coefficient

Alcoa Corp  Alkermes Plc

Pay attention - limited upside

The 3 months correlation between Alcoa and Alkermes is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Alkermes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkermes Plc 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 Alkermes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkermes Plc has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Alkermes Plc go up and down completely randomly.

Pair Corralation between Alcoa Corp and Alkermes Plc

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Alkermes Plc. In addition to that, Alcoa Corp is 1.63 times more volatile than Alkermes Plc. It trades about -0.02 of its total potential returns per unit of risk. Alkermes Plc is currently generating about -0.01 per unit of volatility. If you would invest  2,895  in Alkermes Plc on January 24, 2024 and sell it today you would lose (469.00) from holding Alkermes Plc or give up 16.2% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Alkermes Plc

Alcoa Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Alkermes Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkermes Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alcoa Corp and Alkermes Plc

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

The idea behind Alcoa Corp and Alkermes Plc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.