Correlation Between Alcoa Corp and Newmont Goldcorp

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

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

Diversification Opportunities for Alcoa Corp and Newmont Goldcorp

-0.51

Correlation Coefficient

Alcoa Corp  Newmont Goldcorp

Excellent diversification

The 3 months correlation between Alcoa and Newmont is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Newmont Goldcorp Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont Goldcorp Corp 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 Newmont Goldcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont Goldcorp Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Newmont Goldcorp go up and down completely randomly.

Pair Corralation between Alcoa Corp and Newmont Goldcorp

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.25 times more return on investment than Newmont Goldcorp. However, Alcoa Corp is 1.25 times more volatile than Newmont Goldcorp Corp. It trades about 0.23 of its potential returns per unit of risk. Newmont Goldcorp Corp is currently generating about -0.12 per unit of risk. If you would invest  3,015  in Alcoa Corp on September 2, 2024 and sell it today you would earn a total of  1,628  from holding Alcoa Corp or generate 54.0% return on investment over 90 days.

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

Alcoa Corp  vs.  Newmont Goldcorp Corp

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Newmont Goldcorp Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont Goldcorp Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alcoa Corp and Newmont Goldcorp

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

The idea behind Alcoa Corp and Newmont Goldcorp Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.