Correlation Between Alcoa Corp and VanEck Energy

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

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

Diversification Opportunities for Alcoa Corp and VanEck Energy

0.36

Correlation Coefficient

Alcoa Corp  VanEck Energy

Weak diversification

The 3 months correlation between Alcoa and VanEck is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and VanEck Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Energy Income 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 VanEck Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Energy Income has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and VanEck Energy go up and down completely randomly.

Pair Corralation between Alcoa Corp and VanEck Energy

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the VanEck Energy. In addition to that, Alcoa Corp is 2.2 times more volatile than VanEck Energy Income. It trades about -0.06 of its total potential returns per unit of risk. VanEck Energy Income is currently generating about 0.12 per unit of volatility. If you would invest  9,248  in VanEck Energy Income on December 27, 2024 and sell it today you would earn a total of  861.00  from holding VanEck Energy Income or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Alcoa Corp  vs.  VanEck Energy Income

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

VanEck Energy Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Energy Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, VanEck Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alcoa Corp and VanEck Energy

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

The idea behind Alcoa Corp and VanEck Energy Income 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.