Correlation Between Alcoa Corp and Avient Corp
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Avient 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 Alcoa Corp and Avient Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Avient Corp, you can compare the effects of market volatilities on Alcoa Corp and Avient 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 Alcoa Corp with a short position of Avient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Avient Corp.
Diversification Opportunities for Alcoa Corp and Avient Corp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and Avient is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp 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 Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Avient Corp go up and down completely randomly.
Pair Corralation between Alcoa Corp and Avient Corp
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.36 times more return on investment than Avient Corp. However, Alcoa Corp is 2.36 times more volatile than Avient Corp. It trades about -0.05 of its potential returns per unit of risk. Avient Corp is currently generating about -0.17 per unit of risk. If you would invest 4,095 in Alcoa Corp on September 13, 2024 and sell it today you would lose (167.00) from holding Alcoa Corp or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Avient Corp
Performance |
| Timeline |
| Alcoa Corp |
| Avient Corp |
Alcoa Corp and Avient Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Avient Corp
The main advantage of trading using opposite Alcoa Corp and Avient Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Avient 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 Avient Corp will offset losses from the drop in Avient Corp's long position.| Alcoa Corp vs. Fortitude Gold Corp | Alcoa Corp vs. New Gold | Alcoa Corp vs. Galiano Gold | Alcoa Corp vs. GoldMining |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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