Correlation Between Alcoa Corp and PENN NATL
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and PENN NATL 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 PENN NATL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and PENN NATL GAMING, you can compare the effects of market volatilities on Alcoa Corp and PENN NATL 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 PENN NATL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and PENN NATL.
Diversification Opportunities for Alcoa Corp and PENN NATL
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and PENN is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and PENN NATL go up and down completely randomly.
Pair Corralation between Alcoa Corp and PENN NATL
Assuming the 90 days horizon Alcoa Corp is expected to generate 1.01 times more return on investment than PENN NATL. However, Alcoa Corp is 1.01 times more volatile than PENN NATL GAMING. It trades about 0.02 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.02 per unit of risk. If you would invest 4,207 in Alcoa Corp on September 3, 2024 and sell it today you would earn a total of 115.00 from holding Alcoa Corp or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. PENN NATL GAMING
Performance |
| Timeline |
| Alcoa Corp |
| PENN NATL GAMING |
Alcoa Corp and PENN NATL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and PENN NATL
The main advantage of trading using opposite Alcoa Corp and PENN NATL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, PENN NATL 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 PENN NATL will offset losses from the drop in PENN NATL's long position.| Alcoa Corp vs. PENN NATL GAMING | Alcoa Corp vs. BE Semiconductor Industries | Alcoa Corp vs. IMPERIAL TOBACCO | Alcoa Corp vs. Magnachip Semiconductor |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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