Correlation Between Alcoa Corp and EnLink

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

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

Diversification Opportunities for Alcoa Corp and EnLink

0.08

Correlation Coefficient

Alcoa Corp  EnLink

Significant diversification

The 3 months correlation between Alcoa and EnLink is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and EnLink Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnLink Midstream Partners 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 EnLink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnLink Midstream Partners has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and EnLink go up and down completely randomly.

Pair Corralation between Alcoa Corp and EnLink

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the EnLink. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 1.33 times less risky than EnLink. The stock trades about -0.09 of its potential returns per unit of risk. The EnLink Midstream Partners is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  8,926  in EnLink Midstream Partners on December 30, 2024 and sell it today you would lose (1,099) from holding EnLink Midstream Partners or give up 12.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.71%
Values	Daily Returns

Alcoa Corp  vs.  EnLink Midstream Partners

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.

EnLink Midstream Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days EnLink Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for EnLink Midstream Partners investors.

Pair Trading with Alcoa Corp and EnLink

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

The idea behind Alcoa Corp and EnLink Midstream Partners 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.