Correlation Between Alcoa Corp and Calfrac Well

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

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

Diversification Opportunities for Alcoa Corp and Calfrac Well

0.48

Correlation Coefficient

Alcoa Corp  Calfrac Well

Very weak diversification

The 3 months correlation between Alcoa and Calfrac is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Calfrac Well Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calfrac Well Services 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 Calfrac Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calfrac Well Services has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Calfrac Well go up and down completely randomly.

Pair Corralation between Alcoa Corp and Calfrac Well

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Calfrac Well. In addition to that, Alcoa Corp is 1.64 times more volatile than Calfrac Well Services. It trades about -0.09 of its total potential returns per unit of risk. Calfrac Well Services is currently generating about 0.0 per unit of volatility. If you would invest  264.00  in Calfrac Well Services on December 28, 2024 and sell it today you would lose (3.00) from holding Calfrac Well Services or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  Calfrac Well Services

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Calfrac Well Services

Risk-Adjusted Performance

Insignificant

Over the last 90 days Calfrac Well Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Calfrac Well is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alcoa Corp and Calfrac Well

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

The idea behind Alcoa Corp and Calfrac Well Services 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.