Correlation Between Alcoa Corp and TOTAL

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

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

Diversification Opportunities for Alcoa Corp and TOTAL

-0.53

Correlation Coefficient

Alcoa Corp  TOTAL

Excellent diversification

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

Pair Corralation between Alcoa Corp and TOTAL

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.75 times more return on investment than TOTAL. However, Alcoa Corp is 2.75 times more volatile than TOTAL CAPITAL INTERNATIONAL. It trades about 0.22 of its potential returns per unit of risk. TOTAL CAPITAL INTERNATIONAL is currently generating about 0.04 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  1,549  from holding Alcoa Corp or generate 50.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	79.69%
Values	Daily Returns

Alcoa Corp  vs.  TOTAL CAPITAL INTERNATIONAL

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.

TOTAL CAPITAL INTERN

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL CAPITAL INTERNATIONAL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TOTAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and TOTAL

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

The idea behind Alcoa Corp and TOTAL CAPITAL INTERNATIONAL 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.