Correlation Between Alcoa Corp and 00914AAQ5

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and 00914AAQ5 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 00914AAQ5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and AL 21 01 SEP 28, you can compare the effects of market volatilities on Alcoa Corp and 00914AAQ5 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 00914AAQ5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and 00914AAQ5.

Diversification Opportunities for Alcoa Corp and 00914AAQ5

-0.65

Correlation Coefficient

Alcoa Corp  00914AAQ5

Excellent diversification

The 3 months correlation between Alcoa and 00914AAQ5 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and AL 21 01 SEP 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 00914AAQ5 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 00914AAQ5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 00914AAQ5 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and 00914AAQ5 go up and down completely randomly.

Pair Corralation between Alcoa Corp and 00914AAQ5

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 5.01 times more return on investment than 00914AAQ5. However, Alcoa Corp is 5.01 times more volatile than AL 21 01 SEP 28. It trades about 0.22 of its potential returns per unit of risk. AL 21 01 SEP 28 is currently generating about -0.12 per unit of risk. If you would invest  3,041  in Alcoa Corp on September 4, 2024 and sell it today you would earn a total of  1,529  from holding Alcoa Corp or generate 50.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Alcoa Corp  vs.  AL 21 01 SEP 28

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 unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

00914AAQ5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AL 21 01 SEP 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 00914AAQ5 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 00914AAQ5

The main advantage of trading using opposite Alcoa Corp and 00914AAQ5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, 00914AAQ5 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 00914AAQ5 will offset losses from the drop in 00914AAQ5's long position.

The idea behind Alcoa Corp and AL 21 01 SEP 28 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.