Correlation Between Alcoa Corp and AngloGold Ashanti

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

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

Diversification Opportunities for Alcoa Corp and AngloGold Ashanti

-0.44

Correlation Coefficient

Alcoa Corp  AngloGold Ashanti

Very good diversification

The 3 months correlation between Alcoa and AngloGold is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and AngloGold Ashanti plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti plc 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 AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti plc has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between Alcoa Corp and AngloGold Ashanti

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.06 times more return on investment than AngloGold Ashanti. However, Alcoa Corp is 1.06 times more volatile than AngloGold Ashanti plc. It trades about 0.18 of its potential returns per unit of risk. AngloGold Ashanti plc is currently generating about -0.22 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 Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Alcoa Corp  vs.  AngloGold Ashanti plc

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.

AngloGold Ashanti plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AngloGold Ashanti plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alcoa Corp and AngloGold Ashanti

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

The idea behind Alcoa Corp and AngloGold Ashanti plc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.