Correlation Between Alcoa Corp and 20825CAQ7

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and 20825CAQ7 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 20825CAQ7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and CONOCOPHILLIPS 65 percent, you can compare the effects of market volatilities on Alcoa Corp and 20825CAQ7 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 20825CAQ7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and 20825CAQ7.

Diversification Opportunities for Alcoa Corp and 20825CAQ7

-0.65

Correlation Coefficient

Alcoa Corp  20825CAQ7

Excellent diversification

The 3 months correlation between Alcoa and 20825CAQ7 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and CONOCOPHILLIPS 65 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONOCOPHILLIPS 65 percent 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 20825CAQ7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONOCOPHILLIPS 65 percent has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and 20825CAQ7 go up and down completely randomly.

Pair Corralation between Alcoa Corp and 20825CAQ7

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.23 times more return on investment than 20825CAQ7. However, Alcoa Corp is 2.23 times more volatile than CONOCOPHILLIPS 65 percent. It trades about 0.09 of its potential returns per unit of risk. CONOCOPHILLIPS 65 percent is currently generating about -0.04 per unit of risk. If you would invest  3,442  in Alcoa Corp on September 14, 2024 and sell it today you would earn a total of  512.00  from holding Alcoa Corp or generate 14.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Alcoa Corp  vs.  CONOCOPHILLIPS 65 percent

Alcoa Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 6 (%) 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.

CONOCOPHILLIPS 65 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONOCOPHILLIPS 65 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 20825CAQ7 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and 20825CAQ7

The main advantage of trading using opposite Alcoa Corp and 20825CAQ7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, 20825CAQ7 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 20825CAQ7 will offset losses from the drop in 20825CAQ7's long position.

The idea behind Alcoa Corp and CONOCOPHILLIPS 65 percent 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.