Correlation Between Alcoa Corp and Vascular Biogenics

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Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Vascular Biogenics 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 Vascular Biogenics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Vascular Biogenics, you can compare the effects of market volatilities on Alcoa Corp and Vascular Biogenics 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 Vascular Biogenics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Vascular Biogenics.

Diversification Opportunities for Alcoa Corp and Vascular Biogenics

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Alcoa and Vascular is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Vascular Biogenics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vascular Biogenics 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 Vascular Biogenics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vascular Biogenics has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Vascular Biogenics go up and down completely randomly.

Pair Corralation between Alcoa Corp and Vascular Biogenics

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.52 times more return on investment than Vascular Biogenics. However, Alcoa Corp is 1.92 times less risky than Vascular Biogenics. It trades about 0.04 of its potential returns per unit of risk. Vascular Biogenics is currently generating about -0.05 per unit of risk. If you would invest  3,377  in Alcoa Corp on March 15, 2024 and sell it today you would earn a total of  594.00  from holding Alcoa Corp or generate 17.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy33.87%
ValuesDaily Returns

Alcoa Corp  vs.  Vascular Biogenics

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.
Vascular Biogenics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vascular Biogenics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Vascular Biogenics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Alcoa Corp and Vascular Biogenics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Vascular Biogenics

The main advantage of trading using opposite Alcoa Corp and Vascular Biogenics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Vascular Biogenics 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 Vascular Biogenics will offset losses from the drop in Vascular Biogenics' long position.
The idea behind Alcoa Corp and Vascular Biogenics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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