Correlation Between Alcoa Corp and IShares MSCI

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

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

Diversification Opportunities for Alcoa Corp and IShares MSCI

-0.51

Correlation Coefficient

Alcoa Corp  IShares MSCI

Excellent diversification

The 3 months correlation between Alcoa and IShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and iShares MSCI Mexico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Mexico 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Mexico has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IShares MSCI go up and down completely randomly.

Pair Corralation between Alcoa Corp and IShares MSCI

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the IShares MSCI. In addition to that, Alcoa Corp is 2.16 times more volatile than iShares MSCI Mexico. It trades about -0.07 of its total potential returns per unit of risk. iShares MSCI Mexico is currently generating about 0.13 per unit of volatility. If you would invest  4,669  in iShares MSCI Mexico on December 29, 2024 and sell it today you would earn a total of  493.00  from holding iShares MSCI Mexico or generate 10.56% return on investment over 90 days.

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

Alcoa Corp  vs.  iShares MSCI Mexico

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.

iShares MSCI Mexico

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Mexico are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alcoa Corp and IShares MSCI

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

The idea behind Alcoa Corp and iShares MSCI Mexico 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 Commodity Directory module to find actively traded commodities issued by global exchanges.