Correlation Between Alcoa Corp and Isabella Bank

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Isabella Bank 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 Alcoa Corp and Isabella Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and Isabella Bank, you can compare the effects of market volatilities on Alcoa Corp and Isabella Bank 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 Alcoa Corp with a short position of Isabella Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Isabella Bank.

Diversification Opportunities for Alcoa Corp and Isabella Bank

-0.66

Correlation Coefficient

Alcoa Corp  Isabella Bank

Excellent diversification

The 3 months correlation between Alcoa and Isabella is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Isabella Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isabella Bank and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Isabella Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isabella Bank has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Isabella Bank go up and down completely randomly.

Pair Corralation between Alcoa Corp and Isabella Bank

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Isabella Bank. In addition to that, Alcoa Corp is 1.13 times more volatile than Isabella Bank. It trades about -0.01 of its total potential returns per unit of risk. Isabella Bank is currently generating about 0.0 per unit of volatility. If you would invest  2,232  in Isabella Bank on February 3, 2024 and sell it today you would lose (405.00) from holding Isabella Bank or give up 18.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.53%
Values	Daily Returns

Alcoa Corp  vs.  Isabella Bank

Alcoa Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Isabella Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Isabella Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alcoa Corp and Isabella Bank

The main advantage of trading using opposite Alcoa Corp and Isabella Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Isabella Bank 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 Isabella Bank will offset losses from the drop in Isabella Bank's long position.

The idea behind Alcoa Corp and Isabella Bank 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.