Correlation Between Alcoa Corp and Power Digital

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

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

Diversification Opportunities for Alcoa Corp and Power Digital

0.7

Correlation Coefficient

Alcoa Corp  Power Digital

Poor diversification

The 3 months correlation between Alcoa and Power is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Power Digital Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Digital Infras 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 Power Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Digital Infras has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Power Digital go up and down completely randomly.

Pair Corralation between Alcoa Corp and Power Digital

If you would invest  3,016  in Alcoa Corp on September 12, 2024 and sell it today you would earn a total of  1,093  from holding Alcoa Corp or generate 36.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.4%
Values	Daily Returns

Alcoa Corp  vs.  Power Digital Infrastructure

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.

Power Digital Infras

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Digital Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Power Digital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alcoa Corp and Power Digital

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

The idea behind Alcoa Corp and Power Digital Infrastructure 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.