Correlation Between Alcoa Corp and Federal National
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Federal National 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 Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Federal National Mortgage, you can compare the effects of market volatilities on Alcoa Corp and Federal National 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 Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Federal National.
Diversification Opportunities for Alcoa Corp and Federal National
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and Federal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Federal National go up and down completely randomly.
Pair Corralation between Alcoa Corp and Federal National
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.16 times less return on investment than Federal National. But when comparing it to its historical volatility, Alcoa Corp is 2.79 times less risky than Federal National. It trades about 0.15 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 564.00 in Federal National Mortgage on September 12, 2024 and sell it today you would earn a total of 1,066 from holding Federal National Mortgage or generate 189.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
Alcoa Corp vs. Federal National Mortgage
Performance |
Timeline |
Alcoa Corp |
Federal National Mortgage |
Alcoa Corp and Federal National Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alcoa Corp and Federal National
The main advantage of trading using opposite Alcoa Corp and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National's long position.Alcoa Corp vs. Sligro Food Group | Alcoa Corp vs. FitLife Brands, Common | Alcoa Corp vs. Aeye Inc | Alcoa Corp vs. Ep Emerging Markets |
Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal National Mortgage | Federal National vs. Federal Home Loan |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |