Correlation Between Alcoa Corp and China New
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and China New 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 New 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 New Energy, you can compare the effects of market volatilities on Alcoa Corp and China New 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 New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and China New.
Diversification Opportunities for Alcoa Corp and China New
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alcoa and China is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and China New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China New Energy 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 New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China New Energy has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and China New go up and down completely randomly.
Pair Corralation between Alcoa Corp and China New
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 11.49 times less return on investment than China New. But when comparing it to its historical volatility, Alcoa Corp is 13.08 times less risky than China New. It trades about 0.22 of its potential returns per unit of risk. China New Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.40 in China New Energy on September 3, 2024 and sell it today you would earn a total of 0.40 from holding China New Energy or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. China New Energy
Performance |
| Timeline |
| Alcoa Corp |
| China New Energy |
Alcoa Corp and China New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and China New
The main advantage of trading using opposite Alcoa Corp and China New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, China New 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 New will offset losses from the drop in China New's long position.The idea behind Alcoa Corp and China New Energy 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.| China New vs. Manaris Corp | China New vs. Green Planet Bio | China New vs. Continental Beverage Brands | China New vs. Opus Magnum Ameris |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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