Correlation Between Alcoa Corp and Nuvation Bio

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

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

Diversification Opportunities for Alcoa Corp and Nuvation Bio

-0.14

Correlation Coefficient

Alcoa Corp  Nuvation Bio

Good diversification

The 3 months correlation between Alcoa and Nuvation is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Nuvation Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvation Bio 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 Nuvation Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvation Bio has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Nuvation Bio go up and down completely randomly.

Pair Corralation between Alcoa Corp and Nuvation Bio

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.66 times more return on investment than Nuvation Bio. However, Alcoa Corp is 1.51 times less risky than Nuvation Bio. It trades about 0.16 of its potential returns per unit of risk. Nuvation Bio is currently generating about -0.02 per unit of risk. If you would invest  3,127  in Alcoa Corp on September 12, 2024 and sell it today you would earn a total of  982.00  from holding Alcoa Corp or generate 31.4% return on investment over 90 days.

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

Alcoa Corp  vs.  Nuvation Bio

Alcoa Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Nuvation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvation Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nuvation Bio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Nuvation Bio

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

The idea behind Alcoa Corp and Nuvation Bio 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.