Correlation Between Alcoa Corp and Yokogawa Electric

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

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

Diversification Opportunities for Alcoa Corp and Yokogawa Electric

0.62

Correlation Coefficient

Alcoa Corp  Yokogawa Electric

Poor diversification

The 3 months correlation between Alcoa and Yokogawa is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Yokogawa Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokogawa Electric Corp 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 Yokogawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokogawa Electric Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Yokogawa Electric go up and down completely randomly.

Pair Corralation between Alcoa Corp and Yokogawa Electric

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Yokogawa Electric. In addition to that, Alcoa Corp is 1.01 times more volatile than Yokogawa Electric Corp. It trades about -0.09 of its total potential returns per unit of risk. Yokogawa Electric Corp is currently generating about -0.09 per unit of volatility. If you would invest  4,323  in Yokogawa Electric Corp on December 28, 2024 and sell it today you would lose (683.00) from holding Yokogawa Electric Corp or give up 15.8% of portfolio value over 90 days.

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

Alcoa Corp  vs.  Yokogawa Electric Corp

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.

Yokogawa Electric Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yokogawa Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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.

Pair Trading with Alcoa Corp and Yokogawa Electric

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

The idea behind Alcoa Corp and Yokogawa Electric Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.