Correlation Between Alcoa Corp and Harding Loevner

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

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

Diversification Opportunities for Alcoa Corp and Harding Loevner

-0.43

Correlation Coefficient

Alcoa Corp  Harding Loevner

Very good diversification

The 3 months correlation between Alcoa and Harding is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Harding Loevner International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Inte 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 Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Inte has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Harding Loevner go up and down completely randomly.

Pair Corralation between Alcoa Corp and Harding Loevner

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 3.8 times more return on investment than Harding Loevner. However, Alcoa Corp is 3.8 times more volatile than Harding Loevner International. It trades about 0.23 of its potential returns per unit of risk. Harding Loevner International is currently generating about -0.05 per unit of risk. If you would invest  3,015  in Alcoa Corp on September 2, 2024 and sell it today you would earn a total of  1,628  from holding Alcoa Corp or generate 54.0% return on investment over 90 days.

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

Alcoa Corp  vs.  Harding Loevner International

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) 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.

Harding Loevner Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harding Loevner International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Harding Loevner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Harding Loevner

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

The idea behind Alcoa Corp and Harding Loevner International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.