Correlation Between Alcoa Corp and Swedbank

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

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

Diversification Opportunities for Alcoa Corp and Swedbank

-0.78

Correlation Coefficient

Alcoa Corp  Swedbank

Pay attention - limited upside

The 3 months correlation between Alcoa and Swedbank is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB 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 Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Swedbank go up and down completely randomly.

Pair Corralation between Alcoa Corp and Swedbank

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.04 times more return on investment than Swedbank. However, Alcoa Corp is 2.04 times more volatile than Swedbank AB. It trades about 0.22 of its potential returns per unit of risk. Swedbank AB is currently generating about -0.08 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  Swedbank AB

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.

Swedbank AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swedbank AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alcoa Corp and Swedbank

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

The idea behind Alcoa Corp and Swedbank AB 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.