Correlation Between Alcoa Corp and Aberdeen Japan

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

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

Diversification Opportunities for Alcoa Corp and Aberdeen Japan

-0.49

Correlation Coefficient

Alcoa Corp  Aberdeen Japan

Very good diversification

The 3 months correlation between Alcoa and Aberdeen is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Aberdeen Japan Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Japan Equity 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 Aberdeen Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Japan Equity has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Aberdeen Japan go up and down completely randomly.

Pair Corralation between Alcoa Corp and Aberdeen Japan

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Aberdeen Japan. In addition to that, Alcoa Corp is 2.09 times more volatile than Aberdeen Japan Equity. It trades about -0.06 of its total potential returns per unit of risk. Aberdeen Japan Equity is currently generating about 0.21 per unit of volatility. If you would invest  568.00  in Aberdeen Japan Equity on December 27, 2024 and sell it today you would earn a total of  101.00  from holding Aberdeen Japan Equity or generate 17.78% return on investment over 90 days.

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

Alcoa Corp  vs.  Aberdeen Japan Equity

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.

Aberdeen Japan Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Japan Equity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively weak technical and fundamental indicators, Aberdeen Japan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Aberdeen Japan

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

The idea behind Alcoa Corp and Aberdeen Japan Equity 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.