Correlation Between Alcoa Corp and AFLAC

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

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

Diversification Opportunities for Alcoa Corp and AFLAC

-0.36

Correlation Coefficient

Alcoa Corp  AFLAC

Very good diversification

The 3 months correlation between Alcoa and AFLAC is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and AFLAC INCORPORATED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFLAC INCORPORATED 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 AFLAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFLAC INCORPORATED has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and AFLAC go up and down completely randomly.

Pair Corralation between Alcoa Corp and AFLAC

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the AFLAC. In addition to that, Alcoa Corp is 6.02 times more volatile than AFLAC INCORPORATED. It trades about -0.06 of its total potential returns per unit of risk. AFLAC INCORPORATED is currently generating about -0.04 per unit of volatility. If you would invest  9,385  in AFLAC INCORPORATED on December 27, 2024 and sell it today you would lose (107.00) from holding AFLAC INCORPORATED or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Alcoa Corp  vs.  AFLAC INCORPORATED

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.

AFLAC INCORPORATED

Risk-Adjusted Performance

Very Weak

Over the last 90 days AFLAC INCORPORATED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AFLAC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and AFLAC

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

The idea behind Alcoa Corp and AFLAC INCORPORATED 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.