Correlation Between Alcoa Corp and Green Plains
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Green Plains 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 Green Plains into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Green Plains Renewable, you can compare the effects of market volatilities on Alcoa Corp and Green Plains 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 Green Plains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Green Plains.
Diversification Opportunities for Alcoa Corp and Green Plains
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alcoa and Green is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Green Plains Renewable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Plains Renewable 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 Green Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Plains Renewable has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Green Plains go up and down completely randomly.
Pair Corralation between Alcoa Corp and Green Plains
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.87 times more return on investment than Green Plains. However, Alcoa Corp is 1.15 times less risky than Green Plains. It trades about 0.11 of its potential returns per unit of risk. Green Plains Renewable is currently generating about -0.08 per unit of risk. If you would invest 2,689 in Alcoa Corp on August 27, 2024 and sell it today you would earn a total of 1,858 from holding Alcoa Corp or generate 69.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Green Plains Renewable
Performance |
| Timeline |
| Alcoa Corp |
| Green Plains Renewable |
Alcoa Corp and Green Plains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Green Plains
The main advantage of trading using opposite Alcoa Corp and Green Plains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Green Plains 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 Green Plains will offset losses from the drop in Green Plains' long position.The idea behind Alcoa Corp and Green Plains Renewable 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.| Green Plains vs. Lsb Industries | Green Plains vs. AdvanSix | Green Plains vs. Tronox Holdings PLC | Green Plains vs. Methanex |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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