Correlation Between Alcoa Corp and Amedisys

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

Diversification Opportunities for Alcoa Corp and Amedisys

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Alcoa and Amedisys is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys 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 Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Amedisys go up and down completely randomly.

Pair Corralation between Alcoa Corp and Amedisys

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 8.28 times more return on investment than Amedisys. However, Alcoa Corp is 8.28 times more volatile than Amedisys. It trades about 0.44 of its potential returns per unit of risk. Amedisys is currently generating about -0.2 per unit of risk. If you would invest  2,622  in Alcoa Corp on December 30, 2023 and sell it today you would earn a total of  757.00  from holding Alcoa Corp or generate 28.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Amedisys

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Amedisys 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Amedisys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Amedisys is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Alcoa Corp and Amedisys Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Amedisys

The main advantage of trading using opposite Alcoa Corp and Amedisys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Amedisys 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 Amedisys will offset losses from the drop in Amedisys' long position.
The idea behind Alcoa Corp and Amedisys 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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