Correlation Between Dakota Gold and Alcoa Corp

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

By analyzing existing cross correlation between Dakota Gold Corp and Alcoa Corp, you can compare the effects of market volatilities on Dakota Gold and Alcoa Corp 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 Dakota Gold with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dakota Gold and Alcoa Corp.

Diversification Opportunities for Dakota Gold and Alcoa Corp

-0.02

Correlation Coefficient

Dakota Gold  Alcoa Corp

Good diversification

The 3 months correlation between Dakota and Alcoa is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dakota Gold Corp and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Dakota Gold 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 Dakota Gold Corp are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Dakota Gold i.e., Dakota Gold and Alcoa Corp go up and down completely randomly.

Pair Corralation between Dakota Gold and Alcoa Corp

Allowing for the 90-day total investment horizon Dakota Gold is expected to generate 17.99 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Dakota Gold Corp is 1.02 times less risky than Alcoa Corp. It trades about 0.01 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,041  in Alcoa Corp on September 4, 2024 and sell it today you would earn a total of  1,529  from holding Alcoa Corp or generate 50.28% return on investment over 90 days.

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

Dakota Gold Corp  vs.  Alcoa Corp

Dakota Gold Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dakota Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dakota Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Dakota Gold and Alcoa Corp

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

The idea behind Dakota Gold Corp and Alcoa Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.