Correlation Between G8 Education and Alcoa
Can any of the company-specific risk be diversified away by investing in both G8 Education and Alcoa 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 G8 Education and Alcoa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G8 Education and Alcoa Inc, you can compare the effects of market volatilities on G8 Education and Alcoa 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 G8 Education with a short position of Alcoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and Alcoa.
Diversification Opportunities for G8 Education and Alcoa
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GEM and Alcoa is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and Alcoa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Inc and G8 Education 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 G8 Education are associated (or correlated) with Alcoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Inc has no effect on the direction of G8 Education i.e., G8 Education and Alcoa go up and down completely randomly.
Pair Corralation between G8 Education and Alcoa
Assuming the 90 days trading horizon G8 Education is expected to under-perform the Alcoa. But the stock apears to be less risky and, when comparing its historical volatility, G8 Education is 1.67 times less risky than Alcoa. The stock trades about -0.01 of its potential returns per unit of risk. The Alcoa Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 6,205 in Alcoa Inc on September 4, 2024 and sell it today you would earn a total of 912.00 from holding Alcoa Inc or generate 14.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
G8 Education vs. Alcoa Inc
Performance |
| Timeline |
| G8 Education |
| Alcoa Inc |
G8 Education and Alcoa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G8 Education and Alcoa
The main advantage of trading using opposite G8 Education and Alcoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education position performs unexpectedly, Alcoa 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 Alcoa will offset losses from the drop in Alcoa's long position.| G8 Education vs. National Australia Bank | G8 Education vs. National Australia Bank | G8 Education vs. Westpac Banking | G8 Education vs. National Australia Bank |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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