Correlation Between Alcoa Corp and KAT Exploration
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and KAT Exploration 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 KAT Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and KAT Exploration, you can compare the effects of market volatilities on Alcoa Corp and KAT Exploration 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 KAT Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and KAT Exploration.
Diversification Opportunities for Alcoa Corp and KAT Exploration
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alcoa and KAT is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and KAT Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAT Exploration 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 KAT Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAT Exploration has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and KAT Exploration go up and down completely randomly.
Pair Corralation between Alcoa Corp and KAT Exploration
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.53 times more return on investment than KAT Exploration. However, Alcoa Corp is 1.89 times less risky than KAT Exploration. It trades about -0.01 of its potential returns per unit of risk. KAT Exploration is currently generating about -0.21 per unit of risk. If you would invest 3,415 in Alcoa Corp on November 29, 2024 and sell it today you would lose (48.00) from holding Alcoa Corp or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alcoa Corp vs. KAT Exploration
Performance |
| Timeline |
| Alcoa Corp |
| KAT Exploration |
Alcoa Corp and KAT Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and KAT Exploration
The main advantage of trading using opposite Alcoa Corp and KAT Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, KAT Exploration 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 KAT Exploration will offset losses from the drop in KAT Exploration'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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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