Correlation Between Alcoa Corp and FEDEX

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

By analyzing existing cross correlation between Alcoa Corp and FEDEX P 495, you can compare the effects of market volatilities on Alcoa Corp and FEDEX 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 FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and FEDEX.

Diversification Opportunities for Alcoa Corp and FEDEX

0.04

Correlation Coefficient

Alcoa Corp  FEDEX

Significant diversification

The 3 months correlation between Alcoa and FEDEX is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and FEDEX P 495 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 495 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P 495 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and FEDEX go up and down completely randomly.

Pair Corralation between Alcoa Corp and FEDEX

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the FEDEX. In addition to that, Alcoa Corp is 1.19 times more volatile than FEDEX P 495. It trades about -0.41 of its total potential returns per unit of risk. FEDEX P 495 is currently generating about 0.01 per unit of volatility. If you would invest  9,170  in FEDEX P 495 on October 7, 2024 and sell it today you would earn a total of  12.00  from holding FEDEX P 495 or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Alcoa Corp  vs.  FEDEX P 495

Alcoa Corp

Risk-Adjusted Performance

0 of 100

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 inconsistent 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.

FEDEX P 495

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P 495 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX 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 FEDEX

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

The idea behind Alcoa Corp and FEDEX P 495 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.