Correlation Between Alcoa Corp and BlackRock

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

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

Diversification Opportunities for Alcoa Corp and BlackRock

0.25

Correlation Coefficient

Alcoa Corp  BlackRock

Modest diversification

The 3 months correlation between Alcoa and BlackRock is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and BlackRock go up and down completely randomly.

Pair Corralation between Alcoa Corp and BlackRock

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.77 times more return on investment than BlackRock. However, Alcoa Corp is 2.77 times more volatile than BlackRock. It trades about 0.07 of its potential returns per unit of risk. BlackRock is currently generating about 0.11 per unit of risk. If you would invest  2,464  in Alcoa Corp on October 5, 2024 and sell it today you would earn a total of  1,335  from holding Alcoa Corp or generate 54.18% 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.  BlackRock

Alcoa Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BlackRock

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alcoa Corp and BlackRock

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

The idea behind Alcoa Corp and BlackRock 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.