Correlation Between Alcoa Corp and Cisco Systems

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Cisco 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 Cisco 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 Cisco Systems, you can compare the effects of market volatilities on Alcoa Corp and Cisco 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 Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Cisco Systems.

Diversification Opportunities for Alcoa Corp and Cisco Systems

-0.11

Correlation Coefficient

Alcoa Corp  Cisco Systems

Good diversification

The 3 months correlation between Alcoa and Cisco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Cisco Systems go up and down completely randomly.

Pair Corralation between Alcoa Corp and Cisco Systems

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.17 times more return on investment than Cisco Systems. However, Alcoa Corp is 2.17 times more volatile than Cisco Systems. It trades about 0.08 of its potential returns per unit of risk. Cisco Systems is currently generating about -0.03 per unit of risk. If you would invest  2,941  in Alcoa Corp on June 30, 2025 and sell it today you would earn a total of  330.00  from holding Alcoa Corp or generate 11.22% return on investment over 90 days.

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

Alcoa Corp  vs.  Cisco Systems

Alcoa Corp

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alcoa Corp may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Cisco Systems

Risk-Adjusted Performance

Weakest

Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Cisco Systems is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Cisco Systems

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

The idea behind Alcoa Corp and Cisco 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.