Correlation Between Alcoa Corp and Xtrackers Russell

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

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

Diversification Opportunities for Alcoa Corp and Xtrackers Russell

0.48

Correlation Coefficient

Alcoa Corp  Xtrackers Russell

Very weak diversification

The 3 months correlation between Alcoa and Xtrackers is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Xtrackers Russell Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Russell 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 Xtrackers Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Russell has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Xtrackers Russell go up and down completely randomly.

Pair Corralation between Alcoa Corp and Xtrackers Russell

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Xtrackers Russell. In addition to that, Alcoa Corp is 3.75 times more volatile than Xtrackers Russell Multifactor. It trades about -0.03 of its total potential returns per unit of risk. Xtrackers Russell Multifactor is currently generating about -0.01 per unit of volatility. If you would invest  5,403  in Xtrackers Russell Multifactor on December 20, 2024 and sell it today you would lose (24.00) from holding Xtrackers Russell Multifactor or give up 0.44% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Xtrackers Russell Multifactor

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 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.

Xtrackers Russell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers Russell Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Xtrackers Russell is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alcoa Corp and Xtrackers Russell

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

The idea behind Alcoa Corp and Xtrackers Russell Multifactor 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.