Correlation Between Alcoa Corp and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Northern Lights, you can compare the effects of market volatilities on Alcoa Corp and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Northern Lights.
Diversification Opportunities for Alcoa Corp and Northern Lights
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and Northern is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Northern Lights go up and down completely randomly.
Pair Corralation between Alcoa Corp and Northern Lights
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.19 times less return on investment than Northern Lights. In addition to that, Alcoa Corp is 3.09 times more volatile than Northern Lights. It trades about 0.03 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.11 per unit of volatility. If you would invest 3,710 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 526.00 from holding Northern Lights or generate 14.18% 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. Northern Lights
Performance |
| Timeline |
| Alcoa Corp |
| Northern Lights |
Alcoa Corp and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Northern Lights
The main advantage of trading using opposite Alcoa Corp and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Alcoa Corp vs. Fortitude Gold Corp | Alcoa Corp vs. New Gold | Alcoa Corp vs. Galiano Gold | Alcoa Corp vs. GoldMining |
| Northern Lights vs. Vanguard Total Stock | Northern Lights vs. SPDR SP 500 | Northern Lights vs. iShares Core SP | Northern Lights vs. Vanguard Dividend Appreciation |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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