Correlation Between Alcoa Corp and Huntsman

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

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

Diversification Opportunities for Alcoa Corp and Huntsman

-0.42

Correlation Coefficient

Alcoa Corp  Huntsman

Very good diversification

The 3 months correlation between Alcoa and Huntsman is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Huntsman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman 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 Huntsman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Huntsman go up and down completely randomly.

Pair Corralation between Alcoa Corp and Huntsman

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.8 times more return on investment than Huntsman. However, Alcoa Corp is 1.8 times more volatile than Huntsman. It trades about -0.07 of its potential returns per unit of risk. Huntsman is currently generating about -0.31 per unit of risk. If you would invest  4,178  in Alcoa Corp on September 23, 2024 and sell it today you would lose (394.00) from holding Alcoa Corp or give up 9.43% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Huntsman

Alcoa Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Huntsman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntsman has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent 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 Huntsman

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

The idea behind Alcoa Corp and Huntsman 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.