Correlation Between Mangalam Cement and Alcoa Corp

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

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

Diversification Opportunities for Mangalam Cement and Alcoa Corp

0.68

Correlation Coefficient

Mangalam Cement  Alcoa Corp

Poor diversification

The 3 months correlation between Mangalam and Alcoa is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mangalam Cement Limited and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Mangalam Cement 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 Mangalam Cement Limited 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 Mangalam Cement i.e., Mangalam Cement and Alcoa Corp go up and down completely randomly.

Pair Corralation between Mangalam Cement and Alcoa Corp

Assuming the 90 days trading horizon Mangalam Cement Limited is expected to generate 0.93 times more return on investment than Alcoa Corp. However, Mangalam Cement Limited is 1.07 times less risky than Alcoa Corp. It trades about 0.23 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.1 per unit of risk. If you would invest  41,100  in Mangalam Cement Limited on February 4, 2024 and sell it today you would earn a total of  50,835  from holding Mangalam Cement Limited or generate 123.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.97%
Values	Daily Returns

Mangalam Cement Limited  vs.  Alcoa Corp

Mangalam Cement

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalam Cement Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Mangalam Cement exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alcoa Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mangalam Cement and Alcoa Corp

The main advantage of trading using opposite Mangalam Cement and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mangalam Cement 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 Mangalam Cement Limited 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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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.