Correlation Between Alcoa Corp and Fidelity Advisor

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

By analyzing existing cross correlation between Alcoa Corp and Fidelity Advisor 529, you can compare the effects of market volatilities on Alcoa Corp and Fidelity Advisor 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 Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Fidelity Advisor.

Diversification Opportunities for Alcoa Corp and Fidelity Advisor

0.84

Correlation Coefficient

Alcoa Corp  Fidelity Advisor

Very poor diversification

The 3 months correlation between Alcoa and Fidelity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Fidelity Advisor 529 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor 529 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 Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor 529 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Fidelity Advisor go up and down completely randomly.

Pair Corralation between Alcoa Corp and Fidelity Advisor

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.31 times less return on investment than Fidelity Advisor. In addition to that, Alcoa Corp is 2.95 times more volatile than Fidelity Advisor 529. It trades about 0.01 of its total potential returns per unit of risk. Fidelity Advisor 529 is currently generating about 0.06 per unit of volatility. If you would invest  5,279  in Fidelity Advisor 529 on September 14, 2024 and sell it today you would earn a total of  1,909  from holding Fidelity Advisor 529 or generate 36.16% return on investment over 90 days.

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

Alcoa Corp  vs.  Fidelity Advisor 529

Alcoa Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 6 (%) 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.

Fidelity Advisor 529

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Advisor 529 are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Advisor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Fidelity Advisor

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

The idea behind Alcoa Corp and Fidelity Advisor 529 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.