Correlation Between Alcoa Corp and ValOre Metals

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

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

Diversification Opportunities for Alcoa Corp and ValOre Metals

0.59

Correlation Coefficient

Alcoa Corp  ValOre Metals

Very weak diversification

The 3 months correlation between Alcoa and ValOre is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ValOre Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ValOre Metals Corp 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 ValOre Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ValOre Metals Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ValOre Metals go up and down completely randomly.

Pair Corralation between Alcoa Corp and ValOre Metals

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the ValOre Metals. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 2.25 times less risky than ValOre Metals. The stock trades about -0.08 of its potential returns per unit of risk. The ValOre Metals Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5.78  in ValOre Metals Corp on December 27, 2024 and sell it today you would lose (0.76) from holding ValOre Metals Corp or give up 13.15% of portfolio value over 90 days.

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

Alcoa Corp  vs.  ValOre Metals Corp

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat 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 company investors.

ValOre Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ValOre Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ValOre Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alcoa Corp and ValOre Metals

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

The idea behind Alcoa Corp and ValOre Metals Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.