Correlation Between New Gold and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both New Gold and Alcoa 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 New Gold and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Gold and Alcoa Corp, you can compare the effects of market volatilities on New Gold and Alcoa 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 New Gold with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Gold and Alcoa Corp.
Diversification Opportunities for New Gold and Alcoa Corp
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Alcoa is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding New Gold and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and New Gold 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 New Gold are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of New Gold i.e., New Gold and Alcoa Corp go up and down completely randomly.
Pair Corralation between New Gold and Alcoa Corp
Considering the 90-day investment horizon New Gold is expected to under-perform the Alcoa Corp. In addition to that, New Gold is 1.12 times more volatile than Alcoa Corp. It trades about -0.06 of its total potential returns per unit of risk. Alcoa Corp is currently generating about 0.22 per unit of volatility. If you would invest 4,131 in Alcoa Corp on August 29, 2024 and sell it today you would earn a total of 611.00 from holding Alcoa Corp or generate 14.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Gold vs. Alcoa Corp
Performance |
| Timeline |
| New Gold |
| Alcoa Corp |
New Gold and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Gold and Alcoa Corp
The main advantage of trading using opposite New Gold and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Gold position performs unexpectedly, Alcoa 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.The idea behind New Gold and Alcoa 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.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |