Correlation Between Alcoa Corp and Mfs Municipal

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

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

Diversification Opportunities for Alcoa Corp and Mfs Municipal

-0.41

Correlation Coefficient

Alcoa Corp  Mfs Municipal

Very good diversification

The 3 months correlation between Alcoa and Mfs is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Mfs Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Municipal Income 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 Mfs Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Municipal Income has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Mfs Municipal go up and down completely randomly.

Pair Corralation between Alcoa Corp and Mfs Municipal

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 9.3 times more return on investment than Mfs Municipal. However, Alcoa Corp is 9.3 times more volatile than Mfs Municipal Income. It trades about 0.09 of its potential returns per unit of risk. Mfs Municipal Income is currently generating about 0.08 per unit of risk. If you would invest  2,464  in Alcoa Corp on September 4, 2024 and sell it today you would earn a total of  2,126  from holding Alcoa Corp or generate 86.28% return on investment over 90 days.

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

Alcoa Corp  vs.  Mfs Municipal Income

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.

Mfs Municipal Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Municipal Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Mfs Municipal 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 Mfs Municipal

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

The idea behind Alcoa Corp and Mfs Municipal Income 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.