Correlation Between Alcoa Corp and Vanguard Total

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

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

Diversification Opportunities for Alcoa Corp and Vanguard Total

-0.8

Correlation Coefficient

Alcoa Corp  Vanguard Total

Pay attention - limited upside

The 3 months correlation between Alcoa and Vanguard is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Vanguard Total go up and down completely randomly.

Pair Corralation between Alcoa Corp and Vanguard Total

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Vanguard Total. In addition to that, Alcoa Corp is 9.96 times more volatile than Vanguard Total Bond. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.11 per unit of volatility. If you would invest  7,158  in Vanguard Total Bond on December 28, 2024 and sell it today you would earn a total of  132.00  from holding Vanguard Total Bond or generate 1.84% return on investment over 90 days.

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

Alcoa Corp  vs.  Vanguard Total Bond

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vanguard Total Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alcoa Corp and Vanguard Total

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

The idea behind Alcoa Corp and Vanguard Total Bond 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.