Correlation Between Alcoa Corp and Intl Star

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

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

Diversification Opportunities for Alcoa Corp and Intl Star

-0.39

Correlation Coefficient

Alcoa Corp  Intl Star

Very good diversification

The 3 months correlation between Alcoa and Intl is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Intl Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intl Star 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 Intl Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intl Star has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Intl Star go up and down completely randomly.

Pair Corralation between Alcoa Corp and Intl Star

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Intl Star. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 4.8 times less risky than Intl Star. The stock trades about -0.2 of its potential returns per unit of risk. The Intl Star is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Intl Star on October 7, 2024 and sell it today you would earn a total of  0.01  from holding Intl Star or generate 12.5% return on investment over 90 days.

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

Alcoa Corp  vs.  Intl Star

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 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.

Intl Star

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intl Star 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alcoa Corp and Intl Star

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

The idea behind Alcoa Corp and Intl Star 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..