Correlation Between Matthews Asia and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Matthews Asia 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 Matthews Asia and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews Asia Small and Alcoa Corp, you can compare the effects of market volatilities on Matthews Asia 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 Matthews Asia with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Asia and Alcoa Corp.
Diversification Opportunities for Matthews Asia and Alcoa Corp
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Matthews and Alcoa is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Small and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Matthews Asia 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 Matthews Asia Small 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 Matthews Asia i.e., Matthews Asia and Alcoa Corp go up and down completely randomly.
Pair Corralation between Matthews Asia and Alcoa Corp
Assuming the 90 days horizon Matthews Asia is expected to generate 5.1 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Matthews Asia Small is 2.48 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 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,333 in Alcoa Corp on January 25, 2024 and sell it today you would earn a total of 1,275 from holding Alcoa Corp or generate 54.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Matthews Asia Small vs. Alcoa Corp
Performance |
Timeline |
Matthews Asia Small |
Alcoa Corp |
Matthews Asia and Alcoa Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Matthews Asia and Alcoa Corp
The main advantage of trading using opposite Matthews Asia and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Asia 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.Matthews Asia vs. Amana Income Fund | Matthews Asia vs. Amana Growth Fund | Matthews Asia vs. Amana Participation Fund | Matthews Asia vs. HUMANA INC |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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