Correlation Between Alcoa Corp and Fidelity Dividend

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

Diversification Opportunities for Alcoa Corp and Fidelity Dividend

0.75

Correlation Coefficient

Alcoa Corp  Fidelity Dividend

Poor diversification

The 3 months correlation between Alcoa and Fidelity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Fidelity Dividend ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Dividend ETF 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 Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Dividend ETF has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Fidelity Dividend go up and down completely randomly.

Pair Corralation between Alcoa Corp and Fidelity Dividend

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 6.98 times less return on investment than Fidelity Dividend. In addition to that, Alcoa Corp is 4.36 times more volatile than Fidelity Dividend ETF. It trades about 0.0 of its total potential returns per unit of risk. Fidelity Dividend ETF is currently generating about 0.1 per unit of volatility. If you would invest  3,806  in Fidelity Dividend ETF on September 19, 2024 and sell it today you would earn a total of  1,485  from holding Fidelity Dividend ETF or generate 39.02% 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.  Fidelity Dividend ETF

Alcoa Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Dividend ETF

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Dividend ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Fidelity Dividend is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alcoa Corp and Fidelity Dividend

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

The idea behind Alcoa Corp and Fidelity Dividend ETF 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.