Correlation Between Alcoa Corp and China Hongqiao
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and China Hongqiao 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 China Hongqiao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and China Hongqiao Group, you can compare the effects of market volatilities on Alcoa Corp and China Hongqiao 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 China Hongqiao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and China Hongqiao.
Diversification Opportunities for Alcoa Corp and China Hongqiao
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and China is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and China Hongqiao Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Hongqiao Group 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 China Hongqiao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Hongqiao Group has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and China Hongqiao go up and down completely randomly.
Pair Corralation between Alcoa Corp and China Hongqiao
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.84 times less return on investment than China Hongqiao. But when comparing it to its historical volatility, Alcoa Corp is 2.45 times less risky than China Hongqiao. It trades about 0.17 of its potential returns per unit of risk. China Hongqiao Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 72.00 in China Hongqiao Group on August 23, 2024 and sell it today you would earn a total of 94.00 from holding China Hongqiao Group or generate 130.56% 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. China Hongqiao Group
Performance |
| Timeline |
| Alcoa Corp |
| China Hongqiao Group |
Alcoa Corp and China Hongqiao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and China Hongqiao
The main advantage of trading using opposite Alcoa Corp and China Hongqiao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, China Hongqiao 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 China Hongqiao will offset losses from the drop in China Hongqiao's long position.| Alcoa Corp vs. Small Cap Core | Alcoa Corp vs. Morningstar Unconstrained Allocation | Alcoa Corp vs. Mutual Of America | Alcoa Corp vs. Ep Emerging Markets |
| China Hongqiao vs. Kaiser Aluminum | China Hongqiao vs. Century Aluminum | China Hongqiao vs. Constellium Nv | China Hongqiao vs. Alcoa Corp |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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