Correlation Between Alcoa Corp and IShares SP
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and IShares SP 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 IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and iShares SP 500, you can compare the effects of market volatilities on Alcoa Corp and IShares SP 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 IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and IShares SP.
Diversification Opportunities for Alcoa Corp and IShares SP
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alcoa and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IShares SP go up and down completely randomly.
Pair Corralation between Alcoa Corp and IShares SP
Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the IShares SP. In addition to that, Alcoa Corp is 4.39 times more volatile than iShares SP 500. It trades about -0.24 of its total potential returns per unit of risk. iShares SP 500 is currently generating about -0.23 per unit of volatility. If you would invest 20,047 in iShares SP 500 on September 18, 2024 and sell it today you would lose (570.00) from holding iShares SP 500 or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. iShares SP 500
Performance |
| Timeline |
| Alcoa Corp |
| iShares SP 500 |
Alcoa Corp and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and IShares SP
The main advantage of trading using opposite Alcoa Corp and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, IShares SP 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 IShares SP will offset losses from the drop in IShares SP's long position.The idea behind Alcoa Corp and iShares SP 500 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.| IShares SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |