Correlation Between Alcoa Corp and 26885BAE0

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and 26885BAE0 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 26885BAE0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and EQM Midstream Partners, you can compare the effects of market volatilities on Alcoa Corp and 26885BAE0 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 26885BAE0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and 26885BAE0.

Diversification Opportunities for Alcoa Corp and 26885BAE0

0.21

Correlation Coefficient

Alcoa Corp  26885BAE0

Modest diversification

The 3 months correlation between Alcoa and 26885BAE0 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and EQM Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQM Midstream Partners 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 26885BAE0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQM Midstream Partners has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and 26885BAE0 go up and down completely randomly.

Pair Corralation between Alcoa Corp and 26885BAE0

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the 26885BAE0. In addition to that, Alcoa Corp is 1.39 times more volatile than EQM Midstream Partners. It trades about -0.07 of its total potential returns per unit of risk. EQM Midstream Partners is currently generating about 0.06 per unit of volatility. If you would invest  9,872  in EQM Midstream Partners on December 29, 2024 and sell it today you would earn a total of  300.00  from holding EQM Midstream Partners or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	44.26%
Values	Daily Returns

Alcoa Corp  vs.  EQM Midstream Partners

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.

EQM Midstream Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EQM Midstream Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, 26885BAE0 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alcoa Corp and 26885BAE0

The main advantage of trading using opposite Alcoa Corp and 26885BAE0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, 26885BAE0 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 26885BAE0 will offset losses from the drop in 26885BAE0's long position.

The idea behind Alcoa Corp and EQM Midstream Partners 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.