Correlation Between Alcoa Corp and Constellium

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

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

Diversification Opportunities for Alcoa Corp and Constellium

-0.76

Correlation Coefficient

Alcoa Corp  Constellium

Pay attention - limited upside

The 3 months correlation between Alcoa and Constellium is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Constellium Nv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellium Nv 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 Constellium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellium Nv has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Constellium go up and down completely randomly.

Pair Corralation between Alcoa Corp and Constellium

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.72 times more return on investment than Constellium. However, Alcoa Corp is 1.38 times less risky than Constellium. It trades about 0.23 of its potential returns per unit of risk. Constellium Nv is currently generating about -0.07 per unit of risk. If you would invest  3,015  in Alcoa Corp on September 3, 2024 and sell it today you would earn a total of  1,628  from holding Alcoa Corp or generate 54.0% return on investment over 90 days.

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

Alcoa Corp  vs.  Constellium Nv

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Constellium Nv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellium Nv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alcoa Corp and Constellium

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

The idea behind Alcoa Corp and Constellium Nv 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.