Correlation Between Alcoa Corp and INTEL

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

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

Diversification Opportunities for Alcoa Corp and INTEL

-0.18

Correlation Coefficient

Alcoa Corp  INTEL

Good diversification

The 3 months correlation between Alcoa and INTEL is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and INTEL PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTEL PORATION 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 INTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTEL PORATION has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and INTEL go up and down completely randomly.

Pair Corralation between Alcoa Corp and INTEL

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the INTEL. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 1.13 times less risky than INTEL. The stock trades about -0.02 of its potential returns per unit of risk. The INTEL PORATION is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,169  in INTEL PORATION on October 23, 2024 and sell it today you would earn a total of  785.00  from holding INTEL PORATION or generate 9.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Alcoa Corp  vs.  INTEL PORATION

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 somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

INTEL PORATION

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Alcoa Corp and INTEL

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

The idea behind Alcoa Corp and INTEL PORATION 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.