Correlation Between State Street and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Institutional and Alcoa Corp, you can compare the effects of market volatilities on State Street 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 State Street with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Alcoa Corp.
Diversification Opportunities for State Street and Alcoa Corp
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between State and Alcoa is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding State Street Institutional and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and State Street 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 State Street Institutional 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 State Street i.e., State Street and Alcoa Corp go up and down completely randomly.
Pair Corralation between State Street and Alcoa Corp
Assuming the 90 days horizon State Street Institutional is expected to generate 0.32 times more return on investment than Alcoa Corp. However, State Street Institutional is 3.09 times less risky than Alcoa Corp. It trades about 0.04 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.02 per unit of risk. If you would invest 1,132 in State Street Institutional on January 24, 2024 and sell it today you would earn a total of 278.00 from holding State Street Institutional or generate 24.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Institutional vs. Alcoa Corp
Performance |
| Timeline |
| State Street Institu |
| Alcoa Corp |
State Street and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Alcoa Corp
The main advantage of trading using opposite State Street and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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