Correlation Between Alcoa Corp and Chemours

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

Diversification Opportunities for Alcoa Corp and Chemours

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Alcoa and Chemours is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Chemours go up and down completely randomly.

Pair Corralation between Alcoa Corp and Chemours

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.54 times more return on investment than Chemours. However, Alcoa Corp is 1.85 times less risky than Chemours. It trades about 0.07 of its potential returns per unit of risk. Chemours Co is currently generating about 0.01 per unit of risk. If you would invest  3,080  in Alcoa Corp on December 29, 2023 and sell it today you would earn a total of  241.00  from holding Alcoa Corp or generate 7.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Chemours Co

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

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

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Alcoa Corp and Chemours Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Chemours

The main advantage of trading using opposite Alcoa Corp and Chemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Chemours 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 Chemours will offset losses from the drop in Chemours' long position.
The idea behind Alcoa Corp and Chemours Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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