Correlation Between Globus Medical and Alcoa Corp

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

Diversification Opportunities for Globus Medical and Alcoa Corp

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Globus and Alcoa is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Globus Medical and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Globus Medical 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 Globus Medical 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 Globus Medical i.e., Globus Medical and Alcoa Corp go up and down completely randomly.

Pair Corralation between Globus Medical and Alcoa Corp

Given the investment horizon of 90 days Globus Medical is expected to under-perform the Alcoa Corp. But the stock apears to be less risky and, when comparing its historical volatility, Globus Medical is 1.48 times less risky than Alcoa Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  2,622  in Alcoa Corp on December 30, 2023 and sell it today you would earn a total of  757.00  from holding Alcoa Corp or generate 28.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Globus Medical  vs.  Alcoa Corp

 Performance 
       Timeline  
Globus Medical 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Globus Medical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Globus Medical is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Alcoa Corp 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Globus Medical and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Globus Medical and Alcoa Corp

The main advantage of trading using opposite Globus Medical and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globus Medical 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.
The idea behind Globus Medical 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.
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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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