Correlation Between Alcoa Corp and ST Energy
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and ST 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 ST 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 ST Energy Transition, you can compare the effects of market volatilities on Alcoa Corp and ST 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 ST Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and ST Energy.
Diversification Opportunities for Alcoa Corp and ST Energy
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alcoa and STET is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ST Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Energy Transition 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 ST Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Energy Transition has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ST Energy go up and down completely randomly.
Pair Corralation between Alcoa Corp and ST Energy
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 30.52 times more return on investment than ST Energy. However, Alcoa Corp is 30.52 times more volatile than ST Energy Transition. It trades about 0.02 of its potential returns per unit of risk. ST Energy Transition is currently generating about 0.25 per unit of risk. If you would invest 4,509 in Alcoa Corp on September 3, 2024 and sell it today you would earn a total of 61.00 from holding Alcoa Corp or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 24.65% |
| Values | Daily Returns |
Alcoa Corp vs. ST Energy Transition
Performance |
| Timeline |
| Alcoa Corp |
| ST Energy Transition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Alcoa Corp and ST Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and ST Energy
The main advantage of trading using opposite Alcoa Corp and ST Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, ST 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 ST Energy will offset losses from the drop in ST Energy's long position.The idea behind Alcoa Corp and ST Energy Transition 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.| ST Energy vs. A SPAC II | ST Energy vs. Athena Technology Acquisition | ST Energy vs. Hudson Acquisition I | ST Energy vs. Marblegate Acquisition Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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