Correlation Between Alcoa Corp and Commercial Metals
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Commercial Metals 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 Commercial Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Commercial Metals, you can compare the effects of market volatilities on Alcoa Corp and Commercial Metals 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 Commercial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Commercial Metals.
Diversification Opportunities for Alcoa Corp and Commercial Metals
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and Commercial is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Commercial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Metals 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 Commercial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Metals has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Commercial Metals go up and down completely randomly.
Pair Corralation between Alcoa Corp and Commercial Metals
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.29 times more return on investment than Commercial Metals. However, Alcoa Corp is 1.29 times more volatile than Commercial Metals. It trades about 0.17 of its potential returns per unit of risk. Commercial Metals is currently generating about 0.08 per unit of risk. If you would invest 3,384 in Alcoa Corp on August 23, 2024 and sell it today you would earn a total of 1,261 from holding Alcoa Corp or generate 37.26% 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. Commercial Metals
Performance |
| Timeline |
| Alcoa Corp |
| Commercial Metals |
Alcoa Corp and Commercial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Commercial Metals
The main advantage of trading using opposite Alcoa Corp and Commercial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Commercial Metals 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 Commercial Metals will offset losses from the drop in Commercial Metals' 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 |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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