Correlation Between Alcoa Corp and SPDR Dow
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and SPDR Dow 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 SPDR Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and SPDR Dow Jones, you can compare the effects of market volatilities on Alcoa Corp and SPDR Dow 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 SPDR Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and SPDR Dow.
Diversification Opportunities for Alcoa Corp and SPDR Dow
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alcoa and SPDR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and SPDR Dow go up and down completely randomly.
Pair Corralation between Alcoa Corp and SPDR Dow
Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the SPDR Dow. In addition to that, Alcoa Corp is 3.68 times more volatile than SPDR Dow Jones. It trades about -0.15 of its total potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.33 per unit of volatility. If you would invest 2,310 in SPDR Dow Jones on November 18, 2024 and sell it today you would earn a total of 115.00 from holding SPDR Dow Jones or generate 4.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. SPDR Dow Jones
Performance |
| Timeline |
| Alcoa Corp |
| SPDR Dow Jones |
Alcoa Corp and SPDR Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and SPDR Dow
The main advantage of trading using opposite Alcoa Corp and SPDR Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, SPDR Dow 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 SPDR Dow will offset losses from the drop in SPDR Dow's long position.| Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum | Alcoa Corp vs. Norsk Hydro ASA |
| SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. SPDR Dow Jones | SPDR Dow vs. SPDR SP International | SPDR Dow vs. iShares Cohen Steers |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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