Correlation Between Alcoa Corp and MCF Energy
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and MCF Energy 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 MCF Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and MCF Energy, you can compare the effects of market volatilities on Alcoa Corp and MCF Energy 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 MCF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and MCF Energy.
Diversification Opportunities for Alcoa Corp and MCF Energy
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alcoa and MCF is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and MCF Energy go up and down completely randomly.
Pair Corralation between Alcoa Corp and MCF Energy
Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the MCF Energy. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 2.81 times less risky than MCF Energy. The stock trades about -0.06 of its potential returns per unit of risk. The MCF Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3.50 in MCF Energy on December 26, 2024 and sell it today you would earn a total of 1.25 from holding MCF Energy or generate 35.71% 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. MCF Energy
Performance |
Timeline |
Alcoa Corp |
MCF Energy |
Alcoa Corp and MCF Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alcoa Corp and MCF Energy
The main advantage of trading using opposite Alcoa Corp and MCF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, MCF Energy 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 MCF Energy will offset losses from the drop in MCF Energy's long position.Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
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Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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