Correlation Between Alcoa Corp and Cref Inflation-linked
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Cref Inflation-linked 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 Cref Inflation-linked into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Cref Inflation Linked Bond, you can compare the effects of market volatilities on Alcoa Corp and Cref Inflation-linked 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 Cref Inflation-linked. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Cref Inflation-linked.
Diversification Opportunities for Alcoa Corp and Cref Inflation-linked
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alcoa and Cref is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Cref Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Inflation Linked 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 Cref Inflation-linked. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Inflation Linked has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Cref Inflation-linked go up and down completely randomly.
Pair Corralation between Alcoa Corp and Cref Inflation-linked
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 18.13 times more return on investment than Cref Inflation-linked. However, Alcoa Corp is 18.13 times more volatile than Cref Inflation Linked Bond. It trades about 0.22 of its potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about 0.23 per unit of risk. If you would invest 4,057 in Alcoa Corp on September 2, 2024 and sell it today you would earn a total of 586.00 from holding Alcoa Corp or generate 14.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Cref Inflation Linked Bond
Performance |
| Timeline |
| Alcoa Corp |
| Cref Inflation Linked |
Alcoa Corp and Cref Inflation-linked Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Cref Inflation-linked
The main advantage of trading using opposite Alcoa Corp and Cref Inflation-linked positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Cref Inflation-linked 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 Cref Inflation-linked will offset losses from the drop in Cref Inflation-linked'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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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