Correlation Between Alcoa Corp and Wheaton Precious

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

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

Diversification Opportunities for Alcoa Corp and Wheaton Precious

0.24

Correlation Coefficient

Alcoa Corp  Wheaton Precious

Modest diversification

The 3 months correlation between Alcoa and Wheaton is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Wheaton Precious go up and down completely randomly.

Pair Corralation between Alcoa Corp and Wheaton Precious

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.41 times more return on investment than Wheaton Precious. However, Alcoa Corp is 1.41 times more volatile than Wheaton Precious Metals. It trades about 0.05 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about -0.08 per unit of risk. If you would invest  3,592  in Alcoa Corp on September 25, 2024 and sell it today you would earn a total of  266.00  from holding Alcoa Corp or generate 7.41% return on investment over 90 days.

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

Alcoa Corp  vs.  Wheaton Precious Metals

Alcoa Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alcoa Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wheaton Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wheaton Precious Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alcoa Corp and Wheaton Precious

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

The idea behind Alcoa Corp and Wheaton Precious Metals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.