Correlation Between Alcoa Corp and AMGEN

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

By analyzing existing cross correlation between Alcoa Corp and AMGEN INC 32, you can compare the effects of market volatilities on Alcoa Corp and AMGEN 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 AMGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and AMGEN.

Diversification Opportunities for Alcoa Corp and AMGEN

-0.68

Correlation Coefficient

Alcoa Corp  AMGEN

Excellent diversification

The 3 months correlation between Alcoa and AMGEN is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and AMGEN INC 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMGEN INC 32 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 AMGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMGEN INC 32 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and AMGEN go up and down completely randomly.

Pair Corralation between Alcoa Corp and AMGEN

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 7.9 times more return on investment than AMGEN. However, Alcoa Corp is 7.9 times more volatile than AMGEN INC 32. It trades about 0.23 of its potential returns per unit of risk. AMGEN INC 32 is currently generating about -0.17 per unit of risk. If you would invest  3,020  in Alcoa Corp on September 5, 2024 and sell it today you would earn a total of  1,570  from holding Alcoa Corp or generate 51.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Alcoa Corp  vs.  AMGEN INC 32

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.

AMGEN INC 32

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMGEN INC 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMGEN 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 AMGEN

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

The idea behind Alcoa Corp and AMGEN INC 32 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.