Correlation Between Alcoa Corp and Hartford Small

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

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

Diversification Opportunities for Alcoa Corp and Hartford Small

0.74

Correlation Coefficient

Alcoa Corp  Hartford Small

Poor diversification

The 3 months correlation between Alcoa and Hartford is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Hartford Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small Cap 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 Hartford Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Small Cap has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Hartford Small go up and down completely randomly.

Pair Corralation between Alcoa Corp and Hartford Small

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.19 times more return on investment than Hartford Small. However, Alcoa Corp is 2.19 times more volatile than Hartford Small Cap. It trades about 0.07 of its potential returns per unit of risk. Hartford Small Cap is currently generating about 0.03 per unit of risk. If you would invest  3,265  in Alcoa Corp on October 22, 2024 and sell it today you would earn a total of  688.00  from holding Alcoa Corp or generate 21.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Alcoa Corp  vs.  Hartford Small Cap

Alcoa Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Small Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Hartford Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Hartford Small

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

The idea behind Alcoa Corp and Hartford Small Cap 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.