Correlation Between Alcoa Corp and FlexShares Credit

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

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

Diversification Opportunities for Alcoa Corp and FlexShares Credit

-0.65

Correlation Coefficient

Alcoa Corp  FlexShares Credit

Excellent diversification

The 3 months correlation between Alcoa and FlexShares is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and FlexShares Credit Scored Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Credit 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 FlexShares Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Credit has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and FlexShares Credit go up and down completely randomly.

Pair Corralation between Alcoa Corp and FlexShares Credit

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the FlexShares Credit. In addition to that, Alcoa Corp is 4.95 times more volatile than FlexShares Credit Scored Long. It trades about -0.07 of its total potential returns per unit of risk. FlexShares Credit Scored Long is currently generating about 0.02 per unit of volatility. If you would invest  4,169  in FlexShares Credit Scored Long on December 29, 2024 and sell it today you would earn a total of  25.00  from holding FlexShares Credit Scored Long or generate 0.6% return on investment over 90 days.

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

Alcoa Corp  vs.  FlexShares Credit Scored Long

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.

FlexShares Credit

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Credit Scored Long are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, FlexShares Credit is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alcoa Corp and FlexShares Credit

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

The idea behind Alcoa Corp and FlexShares Credit Scored Long 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.