Correlation Between Alcoa Corp and Bank of America
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Bank of America, you can compare the effects of market volatilities on Alcoa Corp and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Bank of America.
Diversification Opportunities for Alcoa Corp and Bank of America
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alcoa and Bank is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Bank of America go up and down completely randomly.
Pair Corralation between Alcoa Corp and Bank of America
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.88 times more return on investment than Bank of America. However, Alcoa Corp is 1.88 times more volatile than Bank of America. It trades about -0.01 of its potential returns per unit of risk. Bank of America is currently generating about -0.12 per unit of risk. If you would invest 3,571 in Alcoa Corp on November 4, 2024 and sell it today you would lose (39.00) from holding Alcoa Corp or give up 1.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Bank of America
Performance |
| Timeline |
| Alcoa Corp |
| Bank of America |
Alcoa Corp and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Bank of America
The main advantage of trading using opposite Alcoa Corp and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Alcoa Corp vs. Agnico Eagle Mines | Alcoa Corp vs. Pan American Silver | Alcoa Corp vs. Wheaton Precious Metals | Alcoa Corp vs. Kinross Gold |
| Bank of America vs. Bank of America | Bank of America vs. Bank of America | Bank of America vs. JPMorgan Chase Co | Bank of America vs. Bank of America |
Check out your portfolio center.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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