Correlation Between Alcoa Corp and KraneShares

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Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and KraneShares 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 KraneShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and KraneShares, you can compare the effects of market volatilities on Alcoa Corp and KraneShares 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 KraneShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and KraneShares.

Diversification Opportunities for Alcoa Corp and KraneShares

-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Alcoa and KraneShares is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and KraneShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares 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 KraneShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and KraneShares go up and down completely randomly.

Pair Corralation between Alcoa Corp and KraneShares

If you would invest  3,605  in Alcoa Corp on September 3, 2024 and sell it today you would earn a total of  1,038  from holding Alcoa Corp or generate 28.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy0.6%
ValuesDaily Returns

Alcoa Corp  vs.  KraneShares

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.
KraneShares 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KraneShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, KraneShares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Alcoa Corp and KraneShares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and KraneShares

The main advantage of trading using opposite Alcoa Corp and KraneShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, KraneShares 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 KraneShares will offset losses from the drop in KraneShares' long position.
The idea behind Alcoa Corp and KraneShares 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.
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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