Correlation Between Alcoa Corp and Karoon Energy
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Karoon 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 Karoon 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 Karoon Energy, you can compare the effects of market volatilities on Alcoa Corp and Karoon 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 Karoon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Karoon Energy.
Diversification Opportunities for Alcoa Corp and Karoon Energy
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alcoa and Karoon is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Karoon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karoon Energy 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 Karoon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karoon Energy has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Karoon Energy go up and down completely randomly.
Pair Corralation between Alcoa Corp and Karoon Energy
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.74 times more return on investment than Karoon Energy. However, Alcoa Corp is 1.36 times less risky than Karoon Energy. It trades about 0.01 of its potential returns per unit of risk. Karoon Energy is currently generating about 0.0 per unit of risk. If you would invest 5,208 in Alcoa Corp on September 3, 2024 and sell it today you would lose (638.00) from holding Alcoa Corp or give up 12.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 99.58% |
Values | Daily Returns |
Alcoa Corp vs. Karoon Energy
Performance |
Timeline |
Alcoa Corp |
Karoon Energy |
Alcoa Corp and Karoon Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alcoa Corp and Karoon Energy
The main advantage of trading using opposite Alcoa Corp and Karoon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Karoon 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 Karoon Energy will offset losses from the drop in Karoon Energy's long position.The idea behind Alcoa Corp and Karoon Energy 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.Karoon Energy vs. CNX Resources Corp | Karoon Energy vs. MV Oil Trust | Karoon Energy vs. San Juan Basin | Karoon Energy vs. VOC Energy Trust |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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