Correlation Between Alcoa Corp and IT Tech

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

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

Diversification Opportunities for Alcoa Corp and IT Tech

-0.23

Correlation Coefficient

Alcoa Corp  IT Tech

Very good diversification

The 3 months correlation between Alcoa and ITP is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and IT Tech Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IT Tech Packaging 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 IT Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IT Tech Packaging has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IT Tech go up and down completely randomly.

Pair Corralation between Alcoa Corp and IT Tech

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the IT Tech. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 5.78 times less risky than IT Tech. The stock trades about -0.07 of its potential returns per unit of risk. The IT Tech Packaging is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  22.00  in IT Tech Packaging on December 17, 2024 and sell it today you would earn a total of  11.00  from holding IT Tech Packaging or generate 50.0% return on investment over 90 days.

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

Alcoa Corp  vs.  IT Tech Packaging

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 weak 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.

IT Tech Packaging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IT Tech Packaging are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IT Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and IT Tech

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

The idea behind Alcoa Corp and IT Tech Packaging 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.