Correlation Between Pan American and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Pan American and Alcoa Corp 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 Pan American and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan American Silver and Alcoa Corp, you can compare the effects of market volatilities on Pan American and Alcoa Corp 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 Pan American with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and Alcoa Corp.
Diversification Opportunities for Pan American and Alcoa Corp
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Pan and Alcoa is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Pan American 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 Pan American Silver are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Pan American i.e., Pan American and Alcoa Corp go up and down completely randomly.
Pair Corralation between Pan American and Alcoa Corp
Given the investment horizon of 90 days Pan American Silver is expected to generate 1.08 times more return on investment than Alcoa Corp. However, Pan American is 1.08 times more volatile than Alcoa Corp. It trades about 0.23 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.06 per unit of risk. If you would invest 2,085 in Pan American Silver on November 5, 2024 and sell it today you would earn a total of 236.00 from holding Pan American Silver or generate 11.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan American Silver vs. Alcoa Corp
Performance |
| Timeline |
| Pan American Silver |
| Alcoa Corp |
Pan American and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan American and Alcoa Corp
The main advantage of trading using opposite Pan American and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American position performs unexpectedly, Alcoa Corp 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 Corp will offset losses from the drop in Alcoa Corp's long position.| Pan American vs. Newmont Goldcorp Corp | Pan American vs. Wheaton Precious Metals | Pan American vs. Franco Nevada | Pan American vs. Kinross Gold |
| Alcoa Corp vs. Agnico Eagle Mines | Alcoa Corp vs. Pan American Silver | Alcoa Corp vs. Wheaton Precious Metals | Alcoa Corp vs. Kinross Gold |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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