Correlation Between Alcoa Corp and Koil Energy
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Koil Energy 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 Koil Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Koil Energy Solutions, you can compare the effects of market volatilities on Alcoa Corp and Koil Energy 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 Koil Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Koil Energy.
Diversification Opportunities for Alcoa Corp and Koil Energy
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and Koil is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Koil Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koil Energy Solutions 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 Koil Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koil Energy Solutions has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Koil Energy go up and down completely randomly.
Pair Corralation between Alcoa Corp and Koil Energy
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 6.8 times less return on investment than Koil Energy. But when comparing it to its historical volatility, Alcoa Corp is 1.6 times less risky than Koil Energy. It trades about 0.02 of its potential returns per unit of risk. Koil Energy Solutions is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 52.00 in Koil Energy Solutions on September 3, 2024 and sell it today you would earn a total of 136.00 from holding Koil Energy Solutions or generate 261.54% 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. Koil Energy Solutions
Performance |
| Timeline |
| Alcoa Corp |
| Koil Energy Solutions |
Alcoa Corp and Koil Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Koil Energy
The main advantage of trading using opposite Alcoa Corp and Koil Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Koil Energy 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 Koil Energy will offset losses from the drop in Koil Energy's long position.The idea behind Alcoa Corp and Koil Energy Solutions 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.| Koil Energy vs. Enterprise Group | Koil Energy vs. High Arctic Energy | Koil Energy vs. Total Energy Services | Koil Energy vs. Trican Well Service |
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.
Other Complementary Tools
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