Correlation Between Alcoa Corp and ITM Power
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and ITM Power 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 ITM Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and ITM Power Plc, you can compare the effects of market volatilities on Alcoa Corp and ITM Power 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 ITM Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and ITM Power.
Diversification Opportunities for Alcoa Corp and ITM Power
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Alcoa and ITM is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ITM Power Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Power Plc 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 ITM Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Power Plc has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ITM Power go up and down completely randomly.
Pair Corralation between Alcoa Corp and ITM Power
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.67 times more return on investment than ITM Power. However, Alcoa Corp is 1.48 times less risky than ITM Power. It trades about 0.04 of its potential returns per unit of risk. ITM Power Plc is currently generating about -0.02 per unit of risk. If you would invest 3,433 in Alcoa Corp on September 4, 2024 and sell it today you would earn a total of 1,137 from holding Alcoa Corp or generate 33.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. ITM Power Plc
Performance |
| Timeline |
| Alcoa Corp |
| ITM Power Plc |
Alcoa Corp and ITM Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and ITM Power
The main advantage of trading using opposite Alcoa Corp and ITM Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, ITM Power 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 ITM Power will offset losses from the drop in ITM Power's long position.| Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
| ITM Power vs. Dear Cashmere Holding | ITM Power vs. Goff Corp | ITM Power vs. Wialan Technologies | ITM Power vs. Cgrowth Capital |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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