Correlation Between Constellium and Alcoa Corp

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

Diversification Opportunities for Constellium and Alcoa Corp

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Constellium and Alcoa is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Constellium Nv and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Constellium 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 Constellium Nv 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 Constellium i.e., Constellium and Alcoa Corp go up and down completely randomly.

Pair Corralation between Constellium and Alcoa Corp

Given the investment horizon of 90 days Constellium Nv is expected to generate 0.72 times more return on investment than Alcoa Corp. However, Constellium Nv is 1.39 times less risky than Alcoa Corp. It trades about 0.06 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.03 per unit of risk. If you would invest  1,562  in Constellium Nv on December 29, 2023 and sell it today you would earn a total of  611.00  from holding Constellium Nv or generate 39.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Constellium Nv  vs.  Alcoa Corp

 Performance 
       Timeline  
Constellium Nv 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Constellium Nv are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Constellium may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Alcoa Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very 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.

Constellium and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Constellium and Alcoa Corp

The main advantage of trading using opposite Constellium and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium 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 Constellium Nv 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.
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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