Correlation Between Alcoa Corp and Kibush Capital

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

Diversification Opportunities for Alcoa Corp and Kibush Capital

0.06
  Correlation Coefficient

Significant diversification

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

Pair Corralation between Alcoa Corp and Kibush Capital

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.87 times less return on investment than Kibush Capital. But when comparing it to its historical volatility, Alcoa Corp is 3.31 times less risky than Kibush Capital. It trades about 0.05 of its potential returns per unit of risk. Kibush Capital Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.25  in Kibush Capital Corp on August 31, 2022 and sell it today you would lose (0.22)  from holding Kibush Capital Corp or give up 88.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.79%
ValuesDaily Returns

Alcoa Corp  vs.  Kibush Capital Corp

 Performance (%) 
       Timeline  
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 current stock price disturbance, may contribute to short-term losses for the investors.

Alcoa Price Channel

Kibush Capital Corp 
Kibush Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kibush Capital Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Kibush Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Kibush Price Channel

Alcoa Corp and Kibush Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Kibush Capital

The main advantage of trading using opposite Alcoa Corp and Kibush Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Kibush Capital 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 Kibush Capital will offset losses from the drop in Kibush Capital's long position.
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The idea behind Alcoa Corp and Kibush Capital 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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