Correlation Between Alcoa Corp and IShares Technology

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and IShares Technology 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 Technology 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 Technology ETF, you can compare the effects of market volatilities on Alcoa Corp and IShares Technology 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 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and IShares Technology.

Diversification Opportunities for Alcoa Corp and IShares Technology

0.76

Correlation Coefficient

Alcoa Corp  IShares Technology

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 Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology ETF 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 Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IShares Technology go up and down completely randomly.

Pair Corralation between Alcoa Corp and IShares Technology

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.64 times more return on investment than IShares Technology. However, Alcoa Corp is 1.64 times more volatile than iShares Technology ETF. It trades about -0.06 of its potential returns per unit of risk. iShares Technology ETF is currently generating about -0.1 per unit of risk. If you would invest  3,756  in Alcoa Corp on December 27, 2024 and sell it today you would lose (422.00) from holding Alcoa Corp or give up 11.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Alcoa Corp  vs.  iShares Technology ETF

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.

iShares Technology ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Technology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Alcoa Corp and IShares Technology

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

The idea behind Alcoa Corp and iShares Technology ETF 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.