Correlation Between Alcoa Corp and Minerals Technologies

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

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

Diversification Opportunities for Alcoa Corp and Minerals Technologies

0.78

Correlation Coefficient

Alcoa Corp  Minerals Technologies

Poor diversification

The 3 months correlation between Alcoa and Minerals is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Minerals Technologies go up and down completely randomly.

Pair Corralation between Alcoa Corp and Minerals Technologies

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.13 times more return on investment than Minerals Technologies. However, Alcoa Corp is 2.13 times more volatile than Minerals Technologies. It trades about -0.06 of its potential returns per unit of risk. Minerals Technologies is currently generating about -0.19 per unit of risk. If you would invest  3,756  in Alcoa Corp on December 27, 2024 and sell it today you would lose (422.00) from holding Alcoa Corp or give up 11.24% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Minerals Technologies

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.

Minerals Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Minerals Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly 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.

Pair Trading with Alcoa Corp and Minerals Technologies

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

The idea behind Alcoa Corp and Minerals Technologies 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.