Correlation Between Alcoa Corp and Compania

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

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

Diversification Opportunities for Alcoa Corp and Compania

-0.57

Correlation Coefficient

Alcoa Corp  Compania

Excellent diversification

The 3 months correlation between Alcoa and Compania is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Compania go up and down completely randomly.

Pair Corralation between Alcoa Corp and Compania

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.41 times more return on investment than Compania. However, Alcoa Corp is 1.41 times more volatile than Compania de Minas. It trades about 0.0 of its potential returns per unit of risk. Compania de Minas is currently generating about -0.1 per unit of risk. If you would invest  3,947  in Alcoa Corp on September 29, 2024 and sell it today you would lose (179.00) from holding Alcoa Corp or give up 4.54% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Compania de Minas

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.

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alcoa Corp and Compania

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

The idea behind Alcoa Corp and Compania de Minas 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.