Correlation Between Alcoa Corp and First Trust
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and First Trust Nasdaq, you can compare the effects of market volatilities on Alcoa Corp and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and First Trust.
Diversification Opportunities for Alcoa Corp and First Trust
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and First Trust go up and down completely randomly.
Pair Corralation between Alcoa Corp and First Trust
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.63 times more return on investment than First Trust. However, Alcoa Corp is 2.63 times more volatile than First Trust Nasdaq. It trades about 0.09 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.1 per unit of risk. If you would invest 2,578 in Alcoa Corp on August 24, 2024 and sell it today you would earn a total of 1,978 from holding Alcoa Corp or generate 76.73% 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. First Trust Nasdaq
Performance |
| Timeline |
| Alcoa Corp |
| First Trust Nasdaq |
Alcoa Corp and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and First Trust
The main advantage of trading using opposite Alcoa Corp and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Alcoa Corp vs. Eshallgo Class A | Alcoa Corp vs. Amtech Systems | Alcoa Corp vs. Gold Fields Ltd | Alcoa Corp vs. Aegean Airlines SA |
| First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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