Correlation Between Alcoa Corp and Target
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Target 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 Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Target, you can compare the effects of market volatilities on Alcoa Corp and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Target.
Diversification Opportunities for Alcoa Corp and Target
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and Target is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Target go up and down completely randomly.
Pair Corralation between Alcoa Corp and Target
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.13 times more return on investment than Target. However, Alcoa Corp is 2.13 times more volatile than Target. It trades about 0.28 of its potential returns per unit of risk. Target is currently generating about -0.18 per unit of risk. If you would invest 3,158 in Alcoa Corp on January 26, 2024 and sell it today you would earn a total of 450.00 from holding Alcoa Corp or generate 14.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Alcoa Corp vs. Target
Performance |
Timeline |
Alcoa Corp |
Target |
Alcoa Corp and Target Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alcoa Corp and Target
The main advantage of trading using opposite Alcoa Corp and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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