Correlation Between Alcoa Corp and Pimco New

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

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

Diversification Opportunities for Alcoa Corp and Pimco New

-0.33

Correlation Coefficient

Alcoa Corp  Pimco New

Very good diversification

The 3 months correlation between Alcoa and Pimco is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Pimco New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco New York 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 Pimco New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco New York has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Pimco New go up and down completely randomly.

Pair Corralation between Alcoa Corp and Pimco New

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.69 times more return on investment than Pimco New. However, Alcoa Corp is 4.69 times more volatile than Pimco New York. It trades about 0.22 of its potential returns per unit of risk. Pimco New York is currently generating about 0.02 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  Pimco New York

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.

Pimco New York

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco New York are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Pimco New is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Pimco New

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

The idea behind Alcoa Corp and Pimco New York 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.