Correlation Between Caribbean Utilities and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Caribbean Utilities 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 Caribbean Utilities and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caribbean Utilities and Alcoa Corp, you can compare the effects of market volatilities on Caribbean Utilities 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 Caribbean Utilities with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribbean Utilities and Alcoa Corp.
Diversification Opportunities for Caribbean Utilities and Alcoa Corp
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caribbean and Alcoa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Caribbean Utilities 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 Caribbean Utilities 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 Caribbean Utilities i.e., Caribbean Utilities and Alcoa Corp go up and down completely randomly.
Pair Corralation between Caribbean Utilities and Alcoa Corp
Assuming the 90 days horizon Caribbean Utilities is expected to generate 2.04 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Caribbean Utilities is 1.41 times less risky than Alcoa Corp. It trades about 0.1 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,752 in Alcoa Corp on January 20, 2024 and sell it today you would earn a total of 795.00 from holding Alcoa Corp or generate 28.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caribbean Utilities vs. Alcoa Corp
Performance |
| Timeline |
| Caribbean Utilities |
| Alcoa Corp |
Caribbean Utilities and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caribbean Utilities and Alcoa Corp
The main advantage of trading using opposite Caribbean Utilities and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribbean Utilities 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.| Caribbean Utilities vs. Ameren Corp | Caribbean Utilities vs. PNM Resources | Caribbean Utilities vs. Centrais Electricas Brasileiras | Caribbean Utilities vs. CMS Energy |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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