Correlation Between Alcoa Corp and Touchstone Exploration

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

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

Diversification Opportunities for Alcoa Corp and Touchstone Exploration

-0.53

Correlation Coefficient

Alcoa Corp  Touchstone Exploration

Excellent diversification

The 3 months correlation between Alcoa and Touchstone is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Touchstone Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Exploration 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 Touchstone Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Exploration has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Touchstone Exploration go up and down completely randomly.

Pair Corralation between Alcoa Corp and Touchstone Exploration

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.81 times more return on investment than Touchstone Exploration. However, Alcoa Corp is 1.23 times less risky than Touchstone Exploration. It trades about 0.24 of its potential returns per unit of risk. Touchstone Exploration is currently generating about 0.02 per unit of risk. If you would invest  4,009  in Alcoa Corp on September 1, 2024 and sell it today you would earn a total of  634.00  from holding Alcoa Corp or generate 15.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Alcoa Corp  vs.  Touchstone Exploration

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) 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.

Touchstone Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Touchstone Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alcoa Corp and Touchstone Exploration

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

The idea behind Alcoa Corp and Touchstone Exploration 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.