Correlation Between Alcoa Corp and UNITED

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

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

Diversification Opportunities for Alcoa Corp and UNITED

-0.67

Correlation Coefficient

Alcoa Corp  UNITED

Excellent diversification

The 3 months correlation between Alcoa and UNITED is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and UNITED TECHNOLOGIES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED TECHNOLOGIES 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 UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED TECHNOLOGIES has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and UNITED go up and down completely randomly.

Pair Corralation between Alcoa Corp and UNITED

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 5.8 times more return on investment than UNITED. However, Alcoa Corp is 5.8 times more volatile than UNITED TECHNOLOGIES P. It trades about 0.2 of its potential returns per unit of risk. UNITED TECHNOLOGIES P is currently generating about 0.06 per unit of risk. If you would invest  4,073  in Alcoa Corp on September 4, 2024 and sell it today you would earn a total of  517.00  from holding Alcoa Corp or generate 12.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Alcoa Corp  vs.  UNITED TECHNOLOGIES P

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.

UNITED TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITED TECHNOLOGIES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITED 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 UNITED

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

The idea behind Alcoa Corp and UNITED TECHNOLOGIES P 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.