Correlation Between Alcoa Corp and California Resources
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and California Resources 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 California Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and California Resources, you can compare the effects of market volatilities on Alcoa Corp and California Resources 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 California Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and California Resources.
Diversification Opportunities for Alcoa Corp and California Resources
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and California is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and California Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources 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 California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and California Resources go up and down completely randomly.
Pair Corralation between Alcoa Corp and California Resources
If you would invest 4,056 in Alcoa Corp on August 31, 2024 and sell it today you would earn a total of 532.00 from holding Alcoa Corp or generate 13.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.55% |
| Values | Daily Returns |
Alcoa Corp vs. California Resources
Performance |
| Timeline |
| Alcoa Corp |
| California Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Alcoa Corp and California Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and California Resources
The main advantage of trading using opposite Alcoa Corp and California Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, California Resources 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 California Resources will offset losses from the drop in California Resources' long position.| Alcoa Corp vs. RLJ Lodging Trust | Alcoa Corp vs. Aquagold International | Alcoa Corp vs. Stepstone Group | Alcoa Corp vs. Morningstar Unconstrained Allocation |
| California Resources vs. Cardinal Energy | California Resources vs. Spartan Delta Corp | California Resources vs. Delek Group | California Resources vs. Bonterra Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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