Correlation Between Alcoa Corp and Spirit Realty

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

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

Diversification Opportunities for Alcoa Corp and Spirit Realty

0.85

Correlation Coefficient

Alcoa Corp  Spirit Realty

Very poor diversification

The 3 months correlation between Alcoa and Spirit is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Spirit Realty Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Realty Capital 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 Spirit Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Realty Capital has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Spirit Realty go up and down completely randomly.

Pair Corralation between Alcoa Corp and Spirit Realty

If you would invest  3,202  in Alcoa Corp on August 30, 2024 and sell it today you would earn a total of  1,386  from holding Alcoa Corp or generate 43.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Alcoa Corp  vs.  Spirit Realty Capital

Alcoa Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Spirit Realty Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirit Realty Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Spirit Realty is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alcoa Corp and Spirit Realty

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

The idea behind Alcoa Corp and Spirit Realty Capital 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.