Correlation Between Alcoa Corp and CITIC

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

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

Diversification Opportunities for Alcoa Corp and CITIC

-0.7

Correlation Coefficient

Alcoa Corp  CITIC

Excellent diversification

The 3 months correlation between Alcoa and CITIC is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and CITIC go up and down completely randomly.

Pair Corralation between Alcoa Corp and CITIC

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the CITIC. In addition to that, Alcoa Corp is 1.88 times more volatile than CITIC Limited. It trades about -0.19 of its total potential returns per unit of risk. CITIC Limited is currently generating about -0.15 per unit of volatility. If you would invest  111.00  in CITIC Limited on December 1, 2024 and sell it today you would lose (10.00) from holding CITIC Limited or give up 9.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	70.0%
Values	Daily Returns

Alcoa Corp  vs.  CITIC Limited

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.

CITIC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alcoa Corp and CITIC

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

The idea behind Alcoa Corp and CITIC Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.