Correlation Between Alcoa Corp and Themes Transatlantic

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

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

Diversification Opportunities for Alcoa Corp and Themes Transatlantic

-0.23

Correlation Coefficient

Alcoa Corp  Themes Transatlantic

Very good diversification

The 3 months correlation between Alcoa and Themes is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Themes Transatlantic Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Transatlantic 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 Themes Transatlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Transatlantic has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Themes Transatlantic go up and down completely randomly.

Pair Corralation between Alcoa Corp and Themes Transatlantic

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Themes Transatlantic. In addition to that, Alcoa Corp is 2.27 times more volatile than Themes Transatlantic Defense. It trades about -0.01 of its total potential returns per unit of risk. Themes Transatlantic Defense is currently generating about 0.21 per unit of volatility. If you would invest  2,544  in Themes Transatlantic Defense on December 19, 2024 and sell it today you would earn a total of  407.00  from holding Themes Transatlantic Defense or generate 16.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Alcoa Corp  vs.  Themes Transatlantic Defense

Alcoa Corp

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Themes Transatlantic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Themes Transatlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Themes Transatlantic

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

The idea behind Alcoa Corp and Themes Transatlantic Defense 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 Transaction History module to view history of all your transactions and understand their impact on performance.