Correlation Between Alcoa Corp and BARRICK

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

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

Diversification Opportunities for Alcoa Corp and BARRICK

0.1

Correlation Coefficient

Alcoa Corp  BARRICK

Average diversification

The 3 months correlation between Alcoa and BARRICK is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and BARRICK NORTH AMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BARRICK NORTH AMER 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 BARRICK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BARRICK NORTH AMER has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and BARRICK go up and down completely randomly.

Pair Corralation between Alcoa Corp and BARRICK

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the BARRICK. In addition to that, Alcoa Corp is 3.74 times more volatile than BARRICK NORTH AMER. It trades about -0.06 of its total potential returns per unit of risk. BARRICK NORTH AMER is currently generating about 0.15 per unit of volatility. If you would invest  9,921  in BARRICK NORTH AMER on December 24, 2024 and sell it today you would earn a total of  582.00  from holding BARRICK NORTH AMER or generate 5.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

Alcoa Corp  vs.  BARRICK NORTH AMER

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.

BARRICK NORTH AMER

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BARRICK NORTH AMER are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, BARRICK may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alcoa Corp and BARRICK

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

The idea behind Alcoa Corp and BARRICK NORTH AMER 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.