Correlation Between Alcoa Corp and CORNERSTONE

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

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

Diversification Opportunities for Alcoa Corp and CORNERSTONE

0.59

Correlation Coefficient

Alcoa Corp  CORNERSTONE

Very weak diversification

The 3 months correlation between Alcoa and CORNERSTONE is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and CORNERSTONE BLDG BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CORNERSTONE BLDG BRANDS 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 CORNERSTONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CORNERSTONE BLDG BRANDS has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and CORNERSTONE go up and down completely randomly.

Pair Corralation between Alcoa Corp and CORNERSTONE

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 157.84 times less return on investment than CORNERSTONE. But when comparing it to its historical volatility, Alcoa Corp is 31.11 times less risky than CORNERSTONE. It trades about 0.02 of its potential returns per unit of risk. CORNERSTONE BLDG BRANDS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,095  in CORNERSTONE BLDG BRANDS on September 4, 2024 and sell it today you would earn a total of  1,880  from holding CORNERSTONE BLDG BRANDS or generate 26.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.64%
Values	Daily Returns

Alcoa Corp  vs.  CORNERSTONE BLDG BRANDS

Alcoa Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

CORNERSTONE BLDG BRANDS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CORNERSTONE BLDG BRANDS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CORNERSTONE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alcoa Corp and CORNERSTONE

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

The idea behind Alcoa Corp and CORNERSTONE BLDG BRANDS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.