Correlation Between Alcoa Corp and Vanguard Minimum

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Vanguard Minimum 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 Minimum 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 Minimum Volatility, you can compare the effects of market volatilities on Alcoa Corp and Vanguard Minimum 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 Minimum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Vanguard Minimum.

Diversification Opportunities for Alcoa Corp and Vanguard Minimum

0.82

Correlation Coefficient

Alcoa Corp  Vanguard Minimum

Very poor diversification

The 3 months correlation between Alcoa and Vanguard is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Vanguard Minimum Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Minimum Vol 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 Minimum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Minimum Vol has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Vanguard Minimum go up and down completely randomly.

Pair Corralation between Alcoa Corp and Vanguard Minimum

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 5.14 times more return on investment than Vanguard Minimum. However, Alcoa Corp is 5.14 times more volatile than Vanguard Minimum Volatility. It trades about 0.23 of its potential returns per unit of risk. Vanguard Minimum Volatility is currently generating about 0.16 per unit of risk. If you would invest  3,015  in Alcoa Corp on September 2, 2024 and sell it today you would earn a total of  1,628  from holding Alcoa Corp or generate 54.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  Vanguard Minimum Volatility

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) 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.

Vanguard Minimum Vol

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Minimum Volatility are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Vanguard Minimum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alcoa Corp and Vanguard Minimum

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

The idea behind Alcoa Corp and Vanguard Minimum Volatility 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..