Correlation Between Alcoa Corp and Aluminumof China

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

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

Diversification Opportunities for Alcoa Corp and Aluminumof China

0.09

Correlation Coefficient

Alcoa Corp  Aluminumof China

Significant diversification

The 3 months correlation between Alcoa and Aluminumof is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China 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 Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Aluminumof China go up and down completely randomly.

Pair Corralation between Alcoa Corp and Aluminumof China

Assuming the 90 days horizon Alcoa Corp is expected to under-perform the Aluminumof China. In addition to that, Alcoa Corp is 1.08 times more volatile than Aluminum of. It trades about -0.49 of its total potential returns per unit of risk. Aluminum of is currently generating about -0.19 per unit of volatility. If you would invest  58.00  in Aluminum of on September 24, 2024 and sell it today you would lose (5.00) from holding Aluminum of or give up 8.62% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Aluminum of

Alcoa Corp

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alcoa Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Aluminumof China

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminumof China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alcoa Corp and Aluminumof China

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

The idea behind Alcoa Corp and Aluminum of 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.