Correlation Between Alcoa Corp and SHP ETF

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

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

Diversification Opportunities for Alcoa Corp and SHP ETF

-0.55

Correlation Coefficient

Alcoa Corp  SHP ETF

Excellent diversification

The 3 months correlation between Alcoa and SHP is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and SHP ETF go up and down completely randomly.

Pair Corralation between Alcoa Corp and SHP ETF

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the SHP ETF. In addition to that, Alcoa Corp is 9.63 times more volatile than SHP ETF Trust. It trades about -0.06 of its total potential returns per unit of risk. SHP ETF Trust is currently generating about 0.12 per unit of volatility. If you would invest  4,617  in SHP ETF Trust on December 26, 2024 and sell it today you would earn a total of  97.00  from holding SHP ETF Trust or generate 2.1% return on investment over 90 days.

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

Alcoa Corp  vs.  SHP ETF Trust

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SHP ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SHP ETF Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, SHP ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alcoa Corp and SHP ETF

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

The idea behind Alcoa Corp and SHP ETF Trust 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.