Correlation Between Vericel Corp and Alcoa Corp

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

Diversification Opportunities for Vericel Corp and Alcoa Corp

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vericel and Alcoa is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Vericel 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 Vericel Corp Ord 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 Vericel Corp i.e., Vericel Corp and Alcoa Corp go up and down completely randomly.

Pair Corralation between Vericel Corp and Alcoa Corp

Given the investment horizon of 90 days Vericel Corp Ord is expected to generate 0.56 times more return on investment than Alcoa Corp. However, Vericel Corp Ord is 1.8 times less risky than Alcoa Corp. It trades about 0.18 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.17 per unit of risk. If you would invest  4,456  in Vericel Corp Ord on November 30, 2023 and sell it today you would earn a total of  344.00  from holding Vericel Corp Ord or generate 7.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vericel Corp Ord  vs.  Alcoa Corp

 Performance 
       Timeline  
Vericel Corp Ord 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Vericel Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.
Alcoa Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Weak
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vericel Corp and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vericel Corp and Alcoa Corp

The main advantage of trading using opposite Vericel Corp and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vericel Corp 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 Vericel Corp Ord 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.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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