Correlation Between Koppers Holdings and Alto Ingredients

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

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

Diversification Opportunities for Koppers Holdings and Alto Ingredients

0.22

Correlation Coefficient

Koppers Holdings  Alto Ingredients

Modest diversification

The 3 months correlation between Koppers and Alto is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Koppers Holdings and Alto Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Ingredients and Koppers Holdings 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 Koppers Holdings are associated (or correlated) with Alto Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Ingredients has no effect on the direction of Koppers Holdings i.e., Koppers Holdings and Alto Ingredients go up and down completely randomly.

Pair Corralation between Koppers Holdings and Alto Ingredients

Considering the 90-day investment horizon Koppers Holdings is expected to generate 0.54 times more return on investment than Alto Ingredients. However, Koppers Holdings is 1.84 times less risky than Alto Ingredients. It trades about 0.0 of its potential returns per unit of risk. Alto Ingredients is currently generating about -0.04 per unit of risk. If you would invest  3,127  in Koppers Holdings on December 19, 2024 and sell it today you would lose (59.00) from holding Koppers Holdings or give up 1.89% of portfolio value over 90 days.

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

Koppers Holdings  vs.  Alto Ingredients

Koppers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Koppers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Koppers Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Alto Ingredients

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alto Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Koppers Holdings and Alto Ingredients

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

The idea behind Koppers Holdings and Alto Ingredients 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.