Correlation Between Alcoa Corp and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Guangdong Investment 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 Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Guangdong Investment Limited, you can compare the effects of market volatilities on Alcoa Corp and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Guangdong Investment.
Diversification Opportunities for Alcoa Corp and Guangdong Investment
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and Guangdong is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Guangdong Investment go up and down completely randomly.
Pair Corralation between Alcoa Corp and Guangdong Investment
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 6.7 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, Alcoa Corp is 2.25 times less risky than Guangdong Investment. It trades about 0.01 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 92.00 in Guangdong Investment Limited on August 27, 2024 and sell it today you would lose (30.00) from holding Guangdong Investment Limited or give up 32.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.24% |
| Values | Daily Returns |
Alcoa Corp vs. Guangdong Investment Limited
Performance |
| Timeline |
| Alcoa Corp |
| Guangdong Investment |
Alcoa Corp and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Guangdong Investment
The main advantage of trading using opposite Alcoa Corp and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.The idea behind Alcoa Corp and Guangdong Investment Limited 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.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Stocks Directory Find actively traded stocks across global markets | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |