Correlation Between SPACE and Alcoa Corp

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

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

Diversification Opportunities for SPACE and Alcoa Corp

0.75

Correlation Coefficient

SPACE  Alcoa Corp

Poor diversification

The 3 months correlation between SPACE and Alcoa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and SPACE 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 SPACE are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of SPACE i.e., SPACE and Alcoa Corp go up and down completely randomly.

Pair Corralation between SPACE and Alcoa Corp

Assuming the 90 days horizon SPACE is expected to generate 1.55 times more return on investment than Alcoa Corp. However, SPACE is 1.55 times more volatile than Alcoa Corp. It trades about 0.2 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.23 per unit of risk. If you would invest  34.00  in SPACE on September 3, 2024 and sell it today you would earn a total of  25.00  from holding SPACE or generate 73.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

SPACE  vs.  Alcoa Corp

SPACE

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPACE and Alcoa Corp

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

The idea behind SPACE and Alcoa Corp 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.