Correlation Between Alcoa Corp and 718546AH7

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and 718546AH7 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 718546AH7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and PHILLIPS 66 5875, you can compare the effects of market volatilities on Alcoa Corp and 718546AH7 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 718546AH7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and 718546AH7.

Diversification Opportunities for Alcoa Corp and 718546AH7

0.43

Correlation Coefficient

Alcoa Corp  718546AH7

Very weak diversification

The 3 months correlation between Alcoa and 718546AH7 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and PHILLIPS 66 5875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHILLIPS 66 5875 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 718546AH7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHILLIPS 66 5875 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and 718546AH7 go up and down completely randomly.

Pair Corralation between Alcoa Corp and 718546AH7

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the 718546AH7. In addition to that, Alcoa Corp is 1.67 times more volatile than PHILLIPS 66 5875. It trades about -0.02 of its total potential returns per unit of risk. PHILLIPS 66 5875 is currently generating about 0.07 per unit of volatility. If you would invest  10,298  in PHILLIPS 66 5875 on October 20, 2024 and sell it today you would earn a total of  612.00  from holding PHILLIPS 66 5875 or generate 5.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.94%
Values	Daily Returns

Alcoa Corp  vs.  PHILLIPS 66 5875

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 current stock price disturbance, may contribute to short-term losses for the investors.

PHILLIPS 66 5875

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHILLIPS 66 5875 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, 718546AH7 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alcoa Corp and 718546AH7

The main advantage of trading using opposite Alcoa Corp and 718546AH7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, 718546AH7 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 718546AH7 will offset losses from the drop in 718546AH7's long position.

The idea behind Alcoa Corp and PHILLIPS 66 5875 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.