Correlation Between Alcoa Corp and Linde Plc

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

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

Diversification Opportunities for Alcoa Corp and Linde Plc

0.35

Correlation Coefficient

Alcoa Corp  Linde Plc

Weak diversification

The 3 months correlation between Alcoa and Linde is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Linde plc Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc Ordinary 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc Ordinary has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Linde Plc go up and down completely randomly.

Pair Corralation between Alcoa Corp and Linde Plc

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Linde Plc. In addition to that, Alcoa Corp is 3.26 times more volatile than Linde plc Ordinary. It trades about -0.2 of its total potential returns per unit of risk. Linde plc Ordinary is currently generating about -0.32 per unit of volatility. If you would invest  46,123  in Linde plc Ordinary on October 7, 2024 and sell it today you would lose (4,773) from holding Linde plc Ordinary or give up 10.35% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Linde plc Ordinary

Alcoa Corp

Risk-Adjusted Performance

0 of 100

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.

Linde plc Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alcoa Corp and Linde Plc

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

The idea behind Alcoa Corp and Linde plc Ordinary 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.