Correlation Between Alcoa Corp and Fidelity Blue

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

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

Diversification Opportunities for Alcoa Corp and Fidelity Blue

0.83

Correlation Coefficient

Alcoa Corp  Fidelity Blue

Very poor diversification

The 3 months correlation between Alcoa and Fidelity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Fidelity Blue Chip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Blue Chip 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 Fidelity Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Blue Chip has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Fidelity Blue go up and down completely randomly.

Pair Corralation between Alcoa Corp and Fidelity Blue

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.79 times more return on investment than Fidelity Blue. However, Alcoa Corp is 4.79 times more volatile than Fidelity Blue Chip. It trades about 0.08 of its potential returns per unit of risk. Fidelity Blue Chip is currently generating about 0.03 per unit of risk. If you would invest  3,442  in Alcoa Corp on September 16, 2024 and sell it today you would earn a total of  470.00  from holding Alcoa Corp or generate 13.65% return on investment over 90 days.

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

Alcoa Corp  vs.  Fidelity Blue Chip

Alcoa Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Blue Chip

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Blue Chip are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Fidelity Blue is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alcoa Corp and Fidelity Blue

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

The idea behind Alcoa Corp and Fidelity Blue Chip 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.