Correlation Between Alcoa Corp and Ero Copper

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

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

Diversification Opportunities for Alcoa Corp and Ero Copper

-0.64

Correlation Coefficient

Alcoa Corp  Ero Copper

Excellent diversification

The 3 months correlation between Alcoa and Ero is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper 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 Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Ero Copper go up and down completely randomly.

Pair Corralation between Alcoa Corp and Ero Copper

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.1 times more return on investment than Ero Copper. However, Alcoa Corp is 1.1 times more volatile than Ero Copper Corp. It trades about 0.12 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.2 per unit of risk. If you would invest  3,244  in Alcoa Corp on September 13, 2024 and sell it today you would earn a total of  710.00  from holding Alcoa Corp or generate 21.89% return on investment over 90 days.

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

Alcoa Corp  vs.  Ero Copper Corp

Alcoa Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 9 (%) 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.

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Alcoa Corp and Ero Copper

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

The idea behind Alcoa Corp and Ero Copper 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..