Correlation Between Alcoa Corp and Fairholme Fund

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

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

Diversification Opportunities for Alcoa Corp and Fairholme Fund

0.84

Correlation Coefficient

Alcoa Corp  Fairholme Fund

Very poor diversification

The 3 months correlation between Alcoa and Fairholme is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and The Fairholme Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairholme Fund 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 Fairholme Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairholme Fund has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Fairholme Fund go up and down completely randomly.

Pair Corralation between Alcoa Corp and Fairholme Fund

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 2.01 times more return on investment than Fairholme Fund. However, Alcoa Corp is 2.01 times more volatile than The Fairholme Fund. It trades about 0.09 of its potential returns per unit of risk. The Fairholme Fund is currently generating about 0.15 per unit of risk. If you would invest  2,477  in Alcoa Corp on May 6, 2025 and sell it today you would earn a total of  363.00  from holding Alcoa Corp or generate 14.65% 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.  The Fairholme Fund

Alcoa Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Fairholme Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Fairholme Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fairholme Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Alcoa Corp and Fairholme Fund

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

The idea behind Alcoa Corp and The Fairholme Fund 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.