Correlation Between Alcoa Corp and VictoryShares WestEnd

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

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

Diversification Opportunities for Alcoa Corp and VictoryShares WestEnd

0.92

Correlation Coefficient

Alcoa Corp  VictoryShares WestEnd

Almost no diversification

The 3 months correlation between Alcoa and VictoryShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and VictoryShares WestEnd Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares WestEnd 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 VictoryShares WestEnd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares WestEnd has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and VictoryShares WestEnd go up and down completely randomly.

Pair Corralation between Alcoa Corp and VictoryShares WestEnd

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.72 times more return on investment than VictoryShares WestEnd. However, Alcoa Corp is 4.72 times more volatile than VictoryShares WestEnd Sector. It trades about 0.22 of its potential returns per unit of risk. VictoryShares WestEnd Sector is currently generating about 0.2 per unit of risk. If you would invest  3,015  in Alcoa Corp on September 3, 2024 and sell it today you would earn a total of  1,555  from holding Alcoa Corp or generate 51.58% return on investment over 90 days.

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

Alcoa Corp  vs.  VictoryShares WestEnd Sector

Alcoa Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 17 (%) 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.

VictoryShares WestEnd

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares WestEnd Sector are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, VictoryShares WestEnd may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alcoa Corp and VictoryShares WestEnd

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

The idea behind Alcoa Corp and VictoryShares WestEnd Sector 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.