Correlation Between Alcoa Corp and IShares Cybersecurity

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

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

Diversification Opportunities for Alcoa Corp and IShares Cybersecurity

0.76

Correlation Coefficient

Alcoa Corp  IShares Cybersecurity

Poor diversification

The 3 months correlation between Alcoa and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and iShares Cybersecurity and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Cybersecurity and 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 IShares Cybersecurity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Cybersecurity and has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IShares Cybersecurity go up and down completely randomly.

Pair Corralation between Alcoa Corp and IShares Cybersecurity

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.86 times more return on investment than IShares Cybersecurity. However, Alcoa Corp is 2.86 times more volatile than iShares Cybersecurity and. It trades about 0.12 of its potential returns per unit of risk. iShares Cybersecurity and is currently generating about 0.11 per unit of risk. If you would invest  3,244  in Alcoa Corp on September 13, 2024 and sell it today you would earn a total of  710.00  from holding Alcoa Corp or generate 21.89% return on investment over 90 days.

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

Alcoa Corp  vs.  iShares Cybersecurity and

Alcoa Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 9 (%) 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.

iShares Cybersecurity and

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Cybersecurity and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, IShares Cybersecurity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alcoa Corp and IShares Cybersecurity

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

The idea behind Alcoa Corp and iShares Cybersecurity and 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.