Correlation Between Alcoa Corp and Cerner Corp

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Cerner 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 Alcoa Corp and Cerner Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and Cerner Corp, you can compare the effects of market volatilities on Alcoa Corp and Cerner 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 Alcoa Corp with a short position of Cerner Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Cerner Corp.

Diversification Opportunities for Alcoa Corp and Cerner Corp

-0.3

Correlation Coefficient

Alcoa Corp  Cerner Corp

Very good diversification

The 3 months correlation between Alcoa and Cerner is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Cerner Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerner 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 Cerner Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerner Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Cerner Corp go up and down completely randomly.

Pair Corralation between Alcoa Corp and Cerner Corp

If you would invest  2,758  in Alcoa Corp on February 22, 2024 and sell it today you would earn a total of  1,457  from holding Alcoa Corp or generate 52.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Alcoa Corp  vs.  Cerner Corp

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Cerner Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cerner Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cerner Corp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Cerner Corp

The main advantage of trading using opposite Alcoa Corp and Cerner Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Cerner 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 Cerner Corp will offset losses from the drop in Cerner Corp's long position.

The idea behind Alcoa Corp and Cerner 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..