Correlation Between Alcoa Corp and Sylvamo Corp

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

Diversification Opportunities for Alcoa Corp and Sylvamo Corp

AlcoaSylvamoDiversified AwayAlcoaSylvamoDiversified Away100%
0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Alcoa and Sylvamo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Sylvamo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sylvamo Corp 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 Sylvamo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sylvamo Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Sylvamo Corp go up and down completely randomly.

Pair Corralation between Alcoa Corp and Sylvamo Corp

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.3 times more return on investment than Sylvamo Corp. However, Alcoa Corp is 1.3 times more volatile than Sylvamo Corp. It trades about -0.02 of its potential returns per unit of risk. Sylvamo Corp is currently generating about -0.28 per unit of risk. If you would invest  3,497  in Alcoa Corp on November 27, 2024 and sell it today you would lose (60.00) from holding Alcoa Corp or give up 1.72% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Sylvamo Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-5051015
JavaScript chart by amCharts 3.21.15AA SLVM
       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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3436384042444648
Sylvamo Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sylvamo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb707580859095

Alcoa Corp and Sylvamo Corp Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.6-3.45-2.29-1.14-0.01931.022.083.144.25.26 0.040.050.060.070.08
JavaScript chart by amCharts 3.21.15AA SLVM
       Returns  

Pair Trading with Alcoa Corp and Sylvamo Corp

The main advantage of trading using opposite Alcoa Corp and Sylvamo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Sylvamo 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 Sylvamo Corp will offset losses from the drop in Sylvamo Corp's long position.
The idea behind Alcoa Corp and Sylvamo 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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