Correlation Between Alcoa Corp and Ero Copper

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

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

Diversification Opportunities for Alcoa Corp and Ero Copper

0.72

Correlation Coefficient

Alcoa Corp  Ero Copper

Poor diversification

The 3 months correlation between Alcoa and Ero is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp 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 Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Ero Copper go up and down completely randomly.

Pair Corralation between Alcoa Corp and Ero Copper

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Ero Copper. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 1.04 times less risky than Ero Copper. The stock trades about -0.06 of its potential returns per unit of risk. The Ero Copper Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,351  in Ero Copper Corp on December 25, 2024 and sell it today you would earn a total of  48.00  from holding Ero Copper Corp or generate 3.55% return on investment over 90 days.

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

Alcoa Corp  vs.  Ero Copper Corp

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.

Ero Copper Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ero Copper Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Ero Copper may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alcoa Corp and Ero Copper

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

The idea behind Alcoa Corp and Ero Copper Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.