Correlation Between Alcoa Corp and IShares Paris

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

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

Diversification Opportunities for Alcoa Corp and IShares Paris

-0.53

Correlation Coefficient

Alcoa Corp  IShares Paris

Excellent diversification

The 3 months correlation between Alcoa and IShares is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and iShares Paris Aligned Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Paris Aligned 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 IShares Paris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Paris Aligned has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IShares Paris go up and down completely randomly.

Pair Corralation between Alcoa Corp and IShares Paris

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.05 times more return on investment than IShares Paris. However, Alcoa Corp is 4.05 times more volatile than iShares Paris Aligned Climate. It trades about 0.22 of its potential returns per unit of risk. iShares Paris Aligned Climate is currently generating about -0.05 per unit of risk. If you would invest  3,015  in Alcoa Corp on September 3, 2024 and sell it today you would earn a total of  1,555  from holding Alcoa Corp or generate 51.58% 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.  iShares Paris Aligned Climate

Alcoa Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

iShares Paris Aligned

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Paris Aligned Climate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, IShares Paris is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alcoa Corp and IShares Paris

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

The idea behind Alcoa Corp and iShares Paris Aligned Climate 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.