Correlation Between Alcoa Corp and KROGER

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

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

Diversification Opportunities for Alcoa Corp and KROGER

-0.4

Correlation Coefficient

Alcoa Corp  KROGER

Very good diversification

The 3 months correlation between Alcoa and KROGER is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and KROGER CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KROGER CO 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 KROGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KROGER CO has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and KROGER go up and down completely randomly.

Pair Corralation between Alcoa Corp and KROGER

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.25 times more return on investment than KROGER. However, Alcoa Corp is 2.25 times more volatile than KROGER CO. It trades about 0.13 of its potential returns per unit of risk. KROGER CO is currently generating about -0.06 per unit of risk. If you would invest  3,127  in Alcoa Corp on September 12, 2024 and sell it today you would earn a total of  827.00  from holding Alcoa Corp or generate 26.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.56%
Values	Daily Returns

Alcoa Corp  vs.  KROGER CO

Alcoa Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

KROGER CO

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Alcoa Corp and KROGER CO 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.