Correlation Between Alcoa Corp and Bryn Resources

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

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

Diversification Opportunities for Alcoa Corp and Bryn Resources

-0.19

Correlation Coefficient

Alcoa Corp  Bryn Resources

Good diversification

The 3 months correlation between Alcoa and Bryn is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Bryn Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bryn Resources 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 Bryn Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bryn Resources has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Bryn Resources go up and down completely randomly.

Pair Corralation between Alcoa Corp and Bryn Resources

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 16.4 times less return on investment than Bryn Resources. But when comparing it to its historical volatility, Alcoa Corp is 19.35 times less risky than Bryn Resources. It trades about 0.2 of its potential returns per unit of risk. Bryn Resources is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.82  in Bryn Resources on October 20, 2024 and sell it today you would lose (0.02) from holding Bryn Resources or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Alcoa Corp  vs.  Bryn Resources

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.

Bryn Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bryn Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bryn Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Bryn Resources

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

The idea behind Alcoa Corp and Bryn Resources 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.