Correlation Between Alcoa Corp and Marubeni Corp

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

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

Diversification Opportunities for Alcoa Corp and Marubeni Corp

-0.67

Correlation Coefficient

Alcoa Corp  Marubeni Corp

Excellent diversification

The 3 months correlation between Alcoa and Marubeni is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Marubeni Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni Corp ADR 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 Marubeni Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni Corp ADR has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Marubeni Corp go up and down completely randomly.

Pair Corralation between Alcoa Corp and Marubeni Corp

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Marubeni Corp. In addition to that, Alcoa Corp is 1.44 times more volatile than Marubeni Corp ADR. It trades about -0.09 of its total potential returns per unit of risk. Marubeni Corp ADR is currently generating about 0.11 per unit of volatility. If you would invest  15,059  in Marubeni Corp ADR on December 28, 2024 and sell it today you would earn a total of  1,886  from holding Marubeni Corp ADR or generate 12.52% return on investment over 90 days.

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

Alcoa Corp  vs.  Marubeni Corp ADR

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.

Marubeni Corp ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni Corp ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Marubeni Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Marubeni Corp

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

The idea behind Alcoa Corp and Marubeni Corp ADR 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.