Correlation Between Alcoa Corp and Cathedra Bitcoin

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Cathedra Bitcoin 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 Cathedra Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and Cathedra Bitcoin, you can compare the effects of market volatilities on Alcoa Corp and Cathedra Bitcoin 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 Cathedra Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Cathedra Bitcoin.

Diversification Opportunities for Alcoa Corp and Cathedra Bitcoin

0.64

Correlation Coefficient

Alcoa Corp  Cathedra Bitcoin

Poor diversification

The 3 months correlation between Alcoa and Cathedra is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Cathedra Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathedra Bitcoin 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 Cathedra Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathedra Bitcoin has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Cathedra Bitcoin go up and down completely randomly.

Pair Corralation between Alcoa Corp and Cathedra Bitcoin

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.39 times more return on investment than Cathedra Bitcoin. However, Alcoa Corp is 2.54 times less risky than Cathedra Bitcoin. It trades about -0.07 of its potential returns per unit of risk. Cathedra Bitcoin is currently generating about -0.11 per unit of risk. If you would invest  3,703  in Alcoa Corp on December 29, 2024 and sell it today you would lose (505.00) from holding Alcoa Corp or give up 13.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Alcoa Corp  vs.  Cathedra Bitcoin

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cathedra Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cathedra Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alcoa Corp and Cathedra Bitcoin

The main advantage of trading using opposite Alcoa Corp and Cathedra Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Cathedra Bitcoin 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 Cathedra Bitcoin will offset losses from the drop in Cathedra Bitcoin's long position.

The idea behind Alcoa Corp and Cathedra Bitcoin 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.