Correlation Between Alcoa Corp and Apple

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

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

Diversification Opportunities for Alcoa Corp and Apple

0.54

Correlation Coefficient

Alcoa Corp  Apple

Very weak diversification

The 3 months correlation between Alcoa and Apple is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Apple go up and down completely randomly.

Pair Corralation between Alcoa Corp and Apple

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.96 times more return on investment than Apple. However, Alcoa Corp is 2.96 times more volatile than Apple Inc. It trades about 0.18 of its potential returns per unit of risk. Apple Inc is currently generating about 0.03 per unit of risk. If you would invest  4,096  in Alcoa Corp on August 30, 2024 and sell it today you would earn a total of  492.00  from holding Alcoa Corp or generate 12.01% return on investment over 90 days.

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

Alcoa Corp  vs.  Apple Inc

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 conflicting basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Apple is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alcoa Corp and Apple

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

The idea behind Alcoa Corp and Apple Inc 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.