Correlation Between Alcoa Corp and Barrick Gold

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

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

Diversification Opportunities for Alcoa Corp and Barrick Gold

-0.67

Correlation Coefficient

Alcoa Corp  Barrick Gold

Excellent diversification

The 3 months correlation between Alcoa and Barrick is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Barrick Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrick Gold 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 Barrick Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrick Gold Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Barrick Gold go up and down completely randomly.

Pair Corralation between Alcoa Corp and Barrick Gold

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Barrick Gold. In addition to that, Alcoa Corp is 1.58 times more volatile than Barrick Gold Corp. It trades about -0.07 of its total potential returns per unit of risk. Barrick Gold Corp is currently generating about 0.23 per unit of volatility. If you would invest  1,537  in Barrick Gold Corp on December 28, 2024 and sell it today you would earn a total of  419.00  from holding Barrick Gold Corp or generate 27.26% 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.  Barrick Gold 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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Barrick Gold Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barrick Gold Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Barrick Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Barrick Gold

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

The idea behind Alcoa Corp and Barrick Gold 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.