Correlation Between Alcoa Corp and Amg Timessquare

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

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

Diversification Opportunities for Alcoa Corp and Amg Timessquare

0.87

Correlation Coefficient

Alcoa Corp  Amg Timessquare

Very poor diversification

The 3 months correlation between Alcoa and Amg is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Amg Timessquare Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amg Timessquare Mid 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 Amg Timessquare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amg Timessquare Mid has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Amg Timessquare go up and down completely randomly.

Pair Corralation between Alcoa Corp and Amg Timessquare

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 3.76 times more return on investment than Amg Timessquare. However, Alcoa Corp is 3.76 times more volatile than Amg Timessquare Mid. It trades about 0.22 of its potential returns per unit of risk. Amg Timessquare Mid is currently generating about 0.19 per unit of risk. If you would invest  3,041  in Alcoa Corp on September 4, 2024 and sell it today you would earn a total of  1,529  from holding Alcoa Corp or generate 50.28% return on investment over 90 days.

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

Alcoa Corp  vs.  Amg Timessquare Mid

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.

Amg Timessquare Mid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amg Timessquare Mid are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Amg Timessquare may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alcoa Corp and Amg Timessquare

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

The idea behind Alcoa Corp and Amg Timessquare Mid 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.