Correlation Between Alcoa Corp and EQUINIX

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

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

Diversification Opportunities for Alcoa Corp and EQUINIX

0.58

Correlation Coefficient

Alcoa Corp  EQUINIX

Very weak diversification

The 3 months correlation between Alcoa and EQUINIX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and EQUINIX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUINIX INC 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 EQUINIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUINIX INC has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and EQUINIX go up and down completely randomly.

Pair Corralation between Alcoa Corp and EQUINIX

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the EQUINIX. In addition to that, Alcoa Corp is 8.7 times more volatile than EQUINIX INC. It trades about -0.14 of its total potential returns per unit of risk. EQUINIX INC is currently generating about 0.02 per unit of volatility. If you would invest  8,629  in EQUINIX INC on November 19, 2024 and sell it today you would earn a total of  21.00  from holding EQUINIX INC or generate 0.24% return on investment over 90 days.

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

Alcoa Corp  vs.  EQUINIX INC

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

EQUINIX INC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EQUINIX INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, EQUINIX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and EQUINIX

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

The idea behind Alcoa Corp and EQUINIX INC 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.