Correlation Between Alcoa Corp and Starboard Investment

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

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

Diversification Opportunities for Alcoa Corp and Starboard Investment

0.58

Correlation Coefficient

Alcoa Corp  Starboard Investment

Very weak diversification

The 3 months correlation between Alcoa and Starboard is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Starboard Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starboard Investment 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 Starboard Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starboard Investment has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Starboard Investment go up and down completely randomly.

Pair Corralation between Alcoa Corp and Starboard Investment

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.9 times more return on investment than Starboard Investment. However, Alcoa Corp is 2.9 times more volatile than Starboard Investment Trust. It trades about -0.03 of its potential returns per unit of risk. Starboard Investment Trust is currently generating about -0.18 per unit of risk. If you would invest  3,411  in Alcoa Corp on December 3, 2024 and sell it today you would lose (86.00) from holding Alcoa Corp or give up 2.52% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Starboard Investment Trust

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Starboard Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Starboard Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Starboard Investment 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 Starboard Investment

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

The idea behind Alcoa Corp and Starboard Investment Trust 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.