Correlation Between Alcoa Corp and Invesco SP

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

By analyzing existing cross correlation between Alcoa Corp and Invesco SP 500, you can compare the effects of market volatilities on Alcoa Corp and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Invesco SP.

Diversification Opportunities for Alcoa Corp and Invesco SP

0.87

Correlation Coefficient

Alcoa Corp  Invesco SP

Very poor diversification

The 3 months correlation between Alcoa and Invesco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Invesco SP go up and down completely randomly.

Pair Corralation between Alcoa Corp and Invesco SP

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.32 times more return on investment than Invesco SP. However, Alcoa Corp is 4.32 times more volatile than Invesco SP 500. It trades about -0.01 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.06 per unit of risk. If you would invest  3,764  in Alcoa Corp on October 8, 2024 and sell it today you would lose (115.00) from holding Alcoa Corp or give up 3.06% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Invesco SP 500

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.

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Invesco SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alcoa Corp and Invesco SP

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

The idea behind Alcoa Corp and Invesco SP 500 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.