Correlation Between Alcoa Corp and Ardagh

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

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

Diversification Opportunities for Alcoa Corp and Ardagh

0.27

Correlation Coefficient

Alcoa Corp  Ardagh

Modest diversification

The 3 months correlation between Alcoa and Ardagh is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Ardagh Packaging Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardagh Packaging Finance 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 Ardagh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardagh Packaging Finance has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Ardagh go up and down completely randomly.

Pair Corralation between Alcoa Corp and Ardagh

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Ardagh. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 2.34 times less risky than Ardagh. The stock trades about -0.09 of its potential returns per unit of risk. The Ardagh Packaging Finance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,704  in Ardagh Packaging Finance on December 29, 2024 and sell it today you would earn a total of  342.00  from holding Ardagh Packaging Finance or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	45.9%
Values	Daily Returns

Alcoa Corp  vs.  Ardagh Packaging Finance

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 unfluctuating 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.

Ardagh Packaging Finance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ardagh Packaging Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ardagh sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Ardagh

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

The idea behind Alcoa Corp and Ardagh Packaging Finance 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.