Correlation Between Alcoa Corp and BERKSHIRE

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

Diversification Opportunities for Alcoa Corp and BERKSHIRE

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Alcoa and BERKSHIRE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and BERKSHIRE HATHAWAY FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BERKSHIRE HATHAWAY FIN 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 BERKSHIRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BERKSHIRE HATHAWAY FIN has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and BERKSHIRE go up and down completely randomly.

Pair Corralation between Alcoa Corp and BERKSHIRE

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the BERKSHIRE. In addition to that, Alcoa Corp is 2.97 times more volatile than BERKSHIRE HATHAWAY FIN. It trades about -0.03 of its total potential returns per unit of risk. BERKSHIRE HATHAWAY FIN is currently generating about 0.02 per unit of volatility. If you would invest  9,211  in BERKSHIRE HATHAWAY FIN on November 28, 2024 and sell it today you would earn a total of  187.00  from holding BERKSHIRE HATHAWAY FIN or generate 2.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  BERKSHIRE HATHAWAY FIN

 Performance 
       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.
BERKSHIRE HATHAWAY FIN 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days BERKSHIRE HATHAWAY FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BERKSHIRE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Alcoa Corp and BERKSHIRE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and BERKSHIRE

The main advantage of trading using opposite Alcoa Corp and BERKSHIRE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, BERKSHIRE 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 BERKSHIRE will offset losses from the drop in BERKSHIRE's long position.
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The idea behind Alcoa Corp and BERKSHIRE HATHAWAY FIN 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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