Correlation Between Alcoa Corp and Capital Group

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

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

Diversification Opportunities for Alcoa Corp and Capital Group

0.63

Correlation Coefficient

Alcoa Corp  Capital Group

Poor diversification

The 3 months correlation between Alcoa and Capital is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Capital Group Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Dividend 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Dividend has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Capital Group go up and down completely randomly.

Pair Corralation between Alcoa Corp and Capital Group

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 3.87 times more return on investment than Capital Group. However, Alcoa Corp is 3.87 times more volatile than Capital Group Dividend. It trades about -0.01 of its potential returns per unit of risk. Capital Group Dividend is currently generating about -0.04 per unit of risk. If you would invest  3,764  in Alcoa Corp on October 8, 2024 and sell it today you would lose (115.00) from holding Alcoa Corp or give up 3.06% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Capital Group Dividend

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Capital Group Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Group Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Capital Group is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alcoa Corp and Capital Group

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

The idea behind Alcoa Corp and Capital Group Dividend 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.