Correlation Between Constellium and Alcoa Corp

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Can any of the company-specific risk be diversified away by investing in both Constellium and Alcoa Corp 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 Constellium and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellium SE and Alcoa Corp, you can compare the effects of market volatilities on Constellium and Alcoa Corp 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 Constellium with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellium and Alcoa Corp.

Diversification Opportunities for Constellium and Alcoa Corp

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Constellium and Alcoa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Constellium SE and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Constellium 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 Constellium SE are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Constellium i.e., Constellium and Alcoa Corp go up and down completely randomly.

Pair Corralation between Constellium and Alcoa Corp

Given the investment horizon of 90 days Constellium SE is expected to under-perform the Alcoa Corp. But the stock apears to be less risky and, when comparing its historical volatility, Constellium SE is 1.37 times less risky than Alcoa Corp. The stock trades about 0.0 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,238  in Alcoa Corp on July 8, 2022 and sell it today you would earn a total of  1,770  from holding Alcoa Corp or generate 79.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Constellium SE  vs.  Alcoa Corp

 Performance (%) 
       Timeline  
Constellium SE 
Constellium Performance
0 of 100
Over the last 90 days Constellium SE has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Constellium Price Channel

Alcoa Corp 
Alcoa Performance
0 of 100
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Alcoa Price Channel

Constellium and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Constellium and Alcoa Corp

The main advantage of trading using opposite Constellium and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellium position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.
Constellium vs. Amazon Inc
The idea behind Constellium SE and Alcoa Corp 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.
Alcoa Corp vs. Amazon Inc
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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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