Correlation Between Alcoa Corp and Anfield Resources
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Anfield Resources 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 Anfield Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Anfield Resources, you can compare the effects of market volatilities on Alcoa Corp and Anfield Resources 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 Anfield Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Anfield Resources.
Diversification Opportunities for Alcoa Corp and Anfield Resources
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and Anfield is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Anfield Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anfield Resources 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 Anfield Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anfield Resources has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Anfield Resources go up and down completely randomly.
Pair Corralation between Alcoa Corp and Anfield Resources
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.41 times more return on investment than Anfield Resources. However, Alcoa Corp is 2.44 times less risky than Anfield Resources. It trades about 0.22 of its potential returns per unit of risk. Anfield Resources is currently generating about -0.04 per unit of risk. If you would invest 4,131 in Alcoa Corp on August 29, 2024 and sell it today you would earn a total of 611.00 from holding Alcoa Corp or generate 14.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Anfield Resources
Performance |
| Timeline |
| Alcoa Corp |
| Anfield Resources |
Alcoa Corp and Anfield Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Anfield Resources
The main advantage of trading using opposite Alcoa Corp and Anfield Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Anfield Resources 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 Anfield Resources will offset losses from the drop in Anfield Resources' long position.The idea behind Alcoa Corp and Anfield Resources 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.| Anfield Resources vs. Petroleo Brasileiro Petrobras | Anfield Resources vs. Equinor ASA ADR | Anfield Resources vs. Eni SpA ADR | Anfield Resources vs. YPF Sociedad Anonima |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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