Correlation Between Alcoa Corp and ECN Capital
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and ECN Capital 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 ECN Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and ECN Capital Corp, you can compare the effects of market volatilities on Alcoa Corp and ECN Capital 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 ECN Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and ECN Capital.
Diversification Opportunities for Alcoa Corp and ECN Capital
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and ECN is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ECN Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECN Capital Corp 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 ECN Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECN Capital Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ECN Capital go up and down completely randomly.
Pair Corralation between Alcoa Corp and ECN Capital
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.55 times more return on investment than ECN Capital. However, Alcoa Corp is 1.55 times more volatile than ECN Capital Corp. It trades about -0.03 of its potential returns per unit of risk. ECN Capital Corp is currently generating about -0.08 per unit of risk. If you would invest 4,059 in Alcoa Corp on September 14, 2024 and sell it today you would lose (105.00) from holding Alcoa Corp or give up 2.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. ECN Capital Corp
Performance |
| Timeline |
| Alcoa Corp |
| ECN Capital Corp |
Alcoa Corp and ECN Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and ECN Capital
The main advantage of trading using opposite Alcoa Corp and ECN Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, ECN Capital 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 ECN Capital will offset losses from the drop in ECN Capital's long position.| Alcoa Corp vs. Fortitude Gold Corp | Alcoa Corp vs. New Gold | Alcoa Corp vs. Galiano Gold | Alcoa Corp vs. GoldMining |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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