This module allows you to analyze existing cross correlation between Citigroup and Alcoa Corporation. You can compare the effects of market volatilities on Citigroup and Alcoa 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 Citigroup with a short position of Alcoa. See also your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Alcoa.
Taking into account the 30 trading days horizon, Citigroup is expected to generate 6.61 times less return on investment than Alcoa. But when comparing it to its historical volatility, Citigroup is 2.44 times less risky than Alcoa. It trades about 0.03 of its potential returns per unit of risk. Alcoa Corporation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,032 in Alcoa Corporation on July 20, 2018 and sell it today you would earn a total of 171.00 from holding Alcoa Corporation or generate 4.24% return on investment over 30 days.
Overlapping area represents the amount of risk that can be diversified away by holding Citigroup Inc and Alcoa Corp. in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Alcoa and Citigroup 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 Citigroup are associated (or correlated) with Alcoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa has no effect on the direction of Citigroup i.e. Citigroup and Alcoa go up and down completely randomly.
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