Correlation Between Alcoa Corp and Vanguard Long

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

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

Diversification Opportunities for Alcoa Corp and Vanguard Long

-0.68

Correlation Coefficient

Alcoa Corp  Vanguard Long

Excellent diversification

The 3 months correlation between Alcoa and Vanguard is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Vanguard Long Term Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term 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 Vanguard Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Vanguard Long go up and down completely randomly.

Pair Corralation between Alcoa Corp and Vanguard Long

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.82 times more return on investment than Vanguard Long. However, Alcoa Corp is 4.82 times more volatile than Vanguard Long Term Corporate. It trades about 0.19 of its potential returns per unit of risk. Vanguard Long Term Corporate is currently generating about 0.0 per unit of risk. If you would invest  3,202  in Alcoa Corp on August 30, 2024 and sell it today you would earn a total of  1,386  from holding Alcoa Corp or generate 43.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Alcoa Corp  vs.  Vanguard Long Term Corporate

Alcoa Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Long Term Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Vanguard Long is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alcoa Corp and Vanguard Long

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

The idea behind Alcoa Corp and Vanguard Long Term Corporate 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.