Correlation Between Vroom and Alcoa Corp

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

Diversification Opportunities for Vroom and Alcoa Corp

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Vroom and Alcoa is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vroom Inc and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Vroom 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 Vroom 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 Vroom i.e., Vroom and Alcoa Corp go up and down completely randomly.

Pair Corralation between Vroom and Alcoa Corp

Considering the 90-day investment horizon Vroom is expected to generate 1.41 times less return on investment than Alcoa Corp. In addition to that, Vroom is 1.45 times more volatile than Alcoa Corp. It trades about 0.11 of its total potential returns per unit of risk. Alcoa Corp is currently generating about 0.22 per unit of volatility. If you would invest  4,088  in Alcoa Corp on September 2, 2022 and sell it today you would earn a total of  925.00  from holding Alcoa Corp or generate 22.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Vroom Inc  vs.  Alcoa Corp

 Performance (%) 
       Timeline  
Vroom Inc 
Vroom Performance
0 of 100
Over the last 90 days Vroom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with sluggish performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Vroom Price Channel

Alcoa Corp 
Alcoa Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 2 (%) 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

Vroom and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vroom and Alcoa Corp

The main advantage of trading using opposite Vroom and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vroom 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.
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The idea behind Vroom 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.
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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