Correlation Between Alcoa Corp and ProShares Short

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

By analyzing existing cross correlation between Alcoa Corp and ProShares Short MidCap400, you can compare the effects of market volatilities on Alcoa Corp and ProShares Short 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 ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and ProShares Short.

Diversification Opportunities for Alcoa Corp and ProShares Short

-0.74

Correlation Coefficient

Alcoa Corp  ProShares Short

Pay attention - limited upside

The 3 months correlation between Alcoa and ProShares is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and ProShares Short MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MidCap400 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short MidCap400 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and ProShares Short go up and down completely randomly.

Pair Corralation between Alcoa Corp and ProShares Short

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the ProShares Short. In addition to that, Alcoa Corp is 2.47 times more volatile than ProShares Short MidCap400. It trades about -0.02 of its total potential returns per unit of risk. ProShares Short MidCap400 is currently generating about -0.04 per unit of volatility. If you would invest  1,889  in ProShares Short MidCap400 on October 23, 2024 and sell it today you would lose (53.00) from holding ProShares Short MidCap400 or give up 2.81% of portfolio value over 90 days.

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

Alcoa Corp  vs.  ProShares Short MidCap400

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 somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ProShares Short MidCap400

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Short MidCap400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ProShares Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and ProShares Short

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

The idea behind Alcoa Corp and ProShares Short MidCap400 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..