Correlation Between Gold Fields and Alcoa Corp

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

By analyzing existing cross correlation between Gold Fields Ltd and Alcoa Corp, you can compare the effects of market volatilities on Gold Fields and Alcoa Corp 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 Gold Fields with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Alcoa Corp.

Diversification Opportunities for Gold Fields and Alcoa Corp

-0.06

Correlation Coefficient

Gold Fields  Alcoa Corp

Good diversification

The 3 months correlation between Gold and Alcoa is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Gold Fields 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 Gold Fields Ltd are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Gold Fields i.e., Gold Fields and Alcoa Corp go up and down completely randomly.

Pair Corralation between Gold Fields and Alcoa Corp

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 0.75 times more return on investment than Alcoa Corp. However, Gold Fields Ltd is 1.33 times less risky than Alcoa Corp. It trades about -0.25 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.39 per unit of risk. If you would invest  1,473  in Gold Fields Ltd on September 24, 2024 and sell it today you would lose (134.00) from holding Gold Fields Ltd or give up 9.1% of portfolio value over 90 days.

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

Gold Fields Ltd  vs.  Alcoa Corp

Gold Fields

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Fields Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Alcoa Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gold Fields and Alcoa Corp

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

The idea behind Gold Fields Ltd and Alcoa 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.