Correlation Between Alcoa Corp and IShares
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and IShares 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 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, you can compare the effects of market volatilities on Alcoa Corp and IShares 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and IShares.
Diversification Opportunities for Alcoa Corp and IShares
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alcoa and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IShares go up and down completely randomly.
Pair Corralation between Alcoa Corp and IShares
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.46 times less return on investment than IShares. In addition to that, Alcoa Corp is 3.5 times more volatile than IShares. It trades about 0.01 of its total potential returns per unit of risk. IShares is currently generating about 0.04 per unit of volatility. If you would invest 2,748 in IShares on September 3, 2024 and sell it today you would earn a total of 105.00 from holding IShares or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 27.79% |
| Values | Daily Returns |
Alcoa Corp vs. IShares
Performance |
| Timeline |
| Alcoa Corp |
| IShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Alcoa Corp and IShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and IShares
The main advantage of trading using opposite Alcoa Corp and IShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, IShares 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 will offset losses from the drop in IShares' long position.The idea behind Alcoa Corp and IShares 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 vs. Vanguard Mid Cap Value | IShares vs. SPDR SP Dividend | IShares vs. SCOR PK | IShares vs. HUMANA INC |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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