Correlation Between Alcoa Corp and International Battery

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

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

Diversification Opportunities for Alcoa Corp and International Battery

-0.93

Correlation Coefficient

Alcoa Corp  International Battery

Pay attention - limited upside

The 3 months correlation between Alcoa and International is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and International Battery Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Battery 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 International Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Battery has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and International Battery go up and down completely randomly.

Pair Corralation between Alcoa Corp and International Battery

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.32 times more return on investment than International Battery. However, Alcoa Corp is 3.09 times less risky than International Battery. It trades about 0.23 of its potential returns per unit of risk. International Battery Metals is currently generating about -0.15 per unit of risk. If you would invest  3,015  in Alcoa Corp on August 31, 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	Significant
Accuracy	98.44%
Values	Daily Returns

Alcoa Corp  vs.  International Battery Metals

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 sluggish basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

International Battery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alcoa Corp and International Battery

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

The idea behind Alcoa Corp and International Battery Metals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.