Correlation Between Belden and Alcoa Corp

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

Diversification Opportunities for Belden and Alcoa Corp

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Belden and Alcoa is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Belden Inc and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Belden 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 Belden Inc 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 Belden i.e., Belden and Alcoa Corp go up and down completely randomly.

Pair Corralation between Belden and Alcoa Corp

Considering the 90-day investment horizon Belden Inc is expected to generate 0.39 times more return on investment than Alcoa Corp. However, Belden Inc is 2.54 times less risky than Alcoa Corp. It trades about -0.19 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.35 per unit of risk. If you would invest  6,472  in Belden Inc on July 3, 2022 and sell it today you would lose (470.00)  from holding Belden Inc or give up 7.26% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Belden Inc  vs.  Alcoa Corp

 Performance (%) 
       Timeline  
Belden Inc 
Belden Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Belden Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Belden sustained solid returns over the last few months and may actually be approaching a breakup point.

Belden 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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Alcoa Price Channel

Belden and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Belden and Alcoa Corp

The main advantage of trading using opposite Belden and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belden 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.
Belden vs. Amazon Inc
The idea behind Belden Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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