Correlation Between Alcoa Corp and Quanex Building

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

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

Diversification Opportunities for Alcoa Corp and Quanex Building

0.39

Correlation Coefficient

Alcoa Corp  Quanex Building

Weak diversification

The 3 months correlation between Alcoa and Quanex is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Quanex Building go up and down completely randomly.

Pair Corralation between Alcoa Corp and Quanex Building

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Quanex Building. In addition to that, Alcoa Corp is 1.42 times more volatile than Quanex Building Products. It trades about -0.01 of its total potential returns per unit of risk. Quanex Building Products is currently generating about 0.06 per unit of volatility. If you would invest  1,909  in Quanex Building Products on February 12, 2024 and sell it today you would earn a total of  1,566  from holding Quanex Building Products or generate 82.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  Quanex Building Products

Alcoa Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Quanex Building Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Quanex Building is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Quanex Building

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

The idea behind Alcoa Corp and Quanex Building Products 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..