Correlation Between Alcoa Corp and VictoryShares Small

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

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

Diversification Opportunities for Alcoa Corp and VictoryShares Small

0.89

Correlation Coefficient

Alcoa Corp  VictoryShares Small

Very poor diversification

The 3 months correlation between Alcoa and VictoryShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and VictoryShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares Small Cap 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 VictoryShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares Small Cap has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and VictoryShares Small go up and down completely randomly.

Pair Corralation between Alcoa Corp and VictoryShares Small

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.53 times more return on investment than VictoryShares Small. However, Alcoa Corp is 2.53 times more volatile than VictoryShares Small Cap. It trades about 0.14 of its potential returns per unit of risk. VictoryShares Small Cap is currently generating about 0.11 per unit of risk. If you would invest  2,445  in Alcoa Corp on April 30, 2025 and sell it today you would earn a total of  599.00  from holding Alcoa Corp or generate 24.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  VictoryShares Small Cap

Alcoa Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 11 (%) 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.

VictoryShares Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares Small Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, VictoryShares Small may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Alcoa Corp and VictoryShares Small

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

The idea behind Alcoa Corp and VictoryShares Small Cap 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.