Correlation Between Alcoa Corp and Gold Resource

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

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

Diversification Opportunities for Alcoa Corp and Gold Resource

-0.56

Correlation Coefficient

Alcoa Corp  Gold Resource

Excellent diversification

The 3 months correlation between Alcoa and Gold is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Gold Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Resource 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 Gold Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Resource has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Gold Resource go up and down completely randomly.

Pair Corralation between Alcoa Corp and Gold Resource

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.31 times more return on investment than Gold Resource. However, Alcoa Corp is 3.2 times less risky than Gold Resource. It trades about 0.19 of its potential returns per unit of risk. Gold Resource is currently generating about -0.05 per unit of risk. If you would invest  3,202  in Alcoa Corp on August 30, 2024 and sell it today you would earn a total of  1,386  from holding Alcoa Corp or generate 43.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Alcoa Corp  vs.  Gold Resource

Alcoa Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Gold Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Resource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alcoa Corp and Gold Resource

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

The idea behind Alcoa Corp and Gold Resource 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.