Correlation Between Alcoa Corp and MicroSectors Gold

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Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and MicroSectors Gold 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 MicroSectors Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and MicroSectors Gold Miners, you can compare the effects of market volatilities on Alcoa Corp and MicroSectors Gold 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 MicroSectors Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and MicroSectors Gold.

Diversification Opportunities for Alcoa Corp and MicroSectors Gold

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alcoa and MicroSectors is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and MicroSectors Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold Miners 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 MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold Miners has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and MicroSectors Gold go up and down completely randomly.

Pair Corralation between Alcoa Corp and MicroSectors Gold

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the MicroSectors Gold. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 2.08 times less risky than MicroSectors Gold. The stock trades about -0.04 of its potential returns per unit of risk. The MicroSectors Gold Miners is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,228  in MicroSectors Gold Miners on March 14, 2025 and sell it today you would earn a total of  2,132  from holding MicroSectors Gold Miners or generate 40.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  MicroSectors Gold Miners

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
MicroSectors Gold Miners 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, MicroSectors Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alcoa Corp and MicroSectors Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and MicroSectors Gold

The main advantage of trading using opposite Alcoa Corp and MicroSectors Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, MicroSectors Gold 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 MicroSectors Gold will offset losses from the drop in MicroSectors Gold's long position.
The idea behind Alcoa Corp and MicroSectors Gold Miners 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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