Correlation Between Alcoa Corp and VanEck Indonesia

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

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

Diversification Opportunities for Alcoa Corp and VanEck Indonesia

0.72

Correlation Coefficient

Alcoa Corp  VanEck Indonesia

Poor diversification

The 3 months correlation between Alcoa and VanEck is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and VanEck Indonesia Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Indonesia Index 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 VanEck Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Indonesia Index has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and VanEck Indonesia go up and down completely randomly.

Pair Corralation between Alcoa Corp and VanEck Indonesia

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.57 times more return on investment than VanEck Indonesia. However, Alcoa Corp is 1.57 times more volatile than VanEck Indonesia Index. It trades about -0.07 of its potential returns per unit of risk. VanEck Indonesia Index is currently generating about -0.15 per unit of risk. If you would invest  3,823  in Alcoa Corp on December 26, 2024 and sell it today you would lose (489.00) from holding Alcoa Corp or give up 12.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  VanEck Indonesia Index

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

VanEck Indonesia Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Indonesia Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain fairly 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 ETF investors.

Pair Trading with Alcoa Corp and VanEck Indonesia

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

The idea behind Alcoa Corp and VanEck Indonesia Index 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.