Correlation Between Alcoa Corp and Fidelity Total

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Fidelity Total 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 Total 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 Total Bond, you can compare the effects of market volatilities on Alcoa Corp and Fidelity Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Fidelity Total.

Diversification Opportunities for Alcoa Corp and Fidelity Total

-0.6

Correlation Coefficient

Alcoa Corp  Fidelity Total

Excellent diversification

The 3 months correlation between Alcoa and Fidelity is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Fidelity Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Bond 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Bond has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Fidelity Total go up and down completely randomly.

Pair Corralation between Alcoa Corp and Fidelity Total

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Fidelity Total. In addition to that, Alcoa Corp is 9.61 times more volatile than Fidelity Total Bond. It trades about -0.07 of its total potential returns per unit of risk. Fidelity Total Bond is currently generating about 0.11 per unit of volatility. If you would invest  4,463  in Fidelity Total Bond on December 29, 2024 and sell it today you would earn a total of  87.00  from holding Fidelity Total Bond or generate 1.95% return on investment over 90 days.

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

Alcoa Corp  vs.  Fidelity Total Bond

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.

Fidelity Total Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Total Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fidelity Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alcoa Corp and Fidelity Total

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

The idea behind Alcoa Corp and Fidelity Total Bond 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.