Correlation Between Alcoa Corp and Black Knight

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

Diversification Opportunities for Alcoa Corp and Black Knight

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Alcoa and Black is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight 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 Black Knight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Knight has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Black Knight go up and down completely randomly.

Pair Corralation between Alcoa Corp and Black Knight

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.69 times more return on investment than Black Knight. However, Alcoa Corp is 2.69 times more volatile than Black Knight. It trades about 0.04 of its potential returns per unit of risk. Black Knight is currently generating about -0.05 per unit of risk. If you would invest  4,779  in Alcoa Corp on September 3, 2022 and sell it today you would earn a total of  260.00  from holding Alcoa Corp or generate 5.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Black Knight

 Performance (%) 
       Timeline  
Alcoa Corp 
Alcoa Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Alcoa Price Channel

Black Knight 
Black Performance
0 of 100
Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Black Knight is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Black Price Channel

Alcoa Corp and Black Knight Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Black Knight

The main advantage of trading using opposite Alcoa Corp and Black Knight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Black Knight 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 Black Knight will offset losses from the drop in Black Knight's long position.
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The idea behind Alcoa Corp and Black Knight 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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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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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