Correlation Between Alcoa Corp and APT Systems

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and APT Systems 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 APT Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alcoa Corp and APT Systems, you can compare the effects of market volatilities on Alcoa Corp and APT Systems 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 APT Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and APT Systems.

Diversification Opportunities for Alcoa Corp and APT Systems

0.6

Correlation Coefficient

Alcoa Corp  APT Systems

Poor diversification

The 3 months correlation between Alcoa and APT is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and APT Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APT Systems 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 APT Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APT Systems has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and APT Systems go up and down completely randomly.

Pair Corralation between Alcoa Corp and APT Systems

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.8 times less return on investment than APT Systems. But when comparing it to its historical volatility, Alcoa Corp is 4.4 times less risky than APT Systems. It trades about 0.14 of its potential returns per unit of risk. APT Systems is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.04  in APT Systems on May 1, 2025 and sell it today you would earn a total of  0.01  from holding APT Systems or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Alcoa Corp  vs.  APT Systems

Alcoa Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

APT Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in APT Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, APT Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and APT Systems

The main advantage of trading using opposite Alcoa Corp and APT Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, APT Systems 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 APT Systems will offset losses from the drop in APT Systems' long position.

The idea behind Alcoa Corp and APT Systems 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.