Correlation Between Alcoa Corp and Santos
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Santos 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 Santos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Santos, you can compare the effects of market volatilities on Alcoa Corp and Santos 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 Santos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Santos.
Diversification Opportunities for Alcoa Corp and Santos
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alcoa and Santos is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Santos go up and down completely randomly.
Pair Corralation between Alcoa Corp and Santos
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.25 times less return on investment than Santos. But when comparing it to its historical volatility, Alcoa Corp is 1.31 times less risky than Santos. It trades about 0.02 of its potential returns per unit of risk. Santos is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 494.00 in Santos on September 3, 2024 and sell it today you would lose (44.00) from holding Santos or give up 8.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 88.28% |
| Values | Daily Returns |
Alcoa Corp vs. Santos
Performance |
| Timeline |
| Alcoa Corp |
| Santos |
Alcoa Corp and Santos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Santos
The main advantage of trading using opposite Alcoa Corp and Santos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Santos 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 Santos will offset losses from the drop in Santos' long position.The idea behind Alcoa Corp and Santos 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.| Santos vs. CNX Resources Corp | Santos vs. MV Oil Trust | Santos vs. San Juan Basin | Santos 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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