Correlation Between Alcoa Corp and TCW ETF

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

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

Diversification Opportunities for Alcoa Corp and TCW ETF

0.8

Correlation Coefficient

Alcoa Corp  TCW ETF

Very poor diversification

The 3 months correlation between Alcoa and TCW is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and TCW ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCW ETF Trust 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 TCW ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCW ETF Trust has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and TCW ETF go up and down completely randomly.

Pair Corralation between Alcoa Corp and TCW ETF

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the TCW ETF. In addition to that, Alcoa Corp is 1.95 times more volatile than TCW ETF Trust. It trades about -0.06 of its total potential returns per unit of risk. TCW ETF Trust is currently generating about -0.06 per unit of volatility. If you would invest  6,433  in TCW ETF Trust on December 25, 2024 and sell it today you would lose (369.00) from holding TCW ETF Trust or give up 5.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Alcoa Corp  vs.  TCW ETF Trust

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

TCW ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days TCW ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, TCW ETF is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alcoa Corp and TCW ETF

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

The idea behind Alcoa Corp and TCW ETF Trust 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.