Correlation Between Alcoa Corp and Vanguard Intermediate

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

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

Diversification Opportunities for Alcoa Corp and Vanguard Intermediate

-0.54

Correlation Coefficient

Alcoa Corp  Vanguard Intermediate

Excellent diversification

The 3 months correlation between Alcoa and Vanguard is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Vanguard Intermediate Term Tre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Alcoa Corp and Vanguard Intermediate

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Vanguard Intermediate. In addition to that, Alcoa Corp is 10.89 times more volatile than Vanguard Intermediate Term Treasury. It trades about -0.09 of its total potential returns per unit of risk. Vanguard Intermediate Term Treasury is currently generating about 0.17 per unit of volatility. If you would invest  5,766  in Vanguard Intermediate Term Treasury on December 28, 2024 and sell it today you would earn a total of  164.00  from holding Vanguard Intermediate Term Treasury or generate 2.84% return on investment over 90 days.

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

Alcoa Corp  vs.  Vanguard Intermediate Term Tre

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Vanguard Intermediate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Treasury are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alcoa Corp and Vanguard Intermediate

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

The idea behind Alcoa Corp and Vanguard Intermediate Term Treasury 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.