Correlation Between Alcoa Corp and Fortuna Silver

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

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

Diversification Opportunities for Alcoa Corp and Fortuna Silver

-0.46

Correlation Coefficient

Alcoa Corp  Fortuna Silver

Very good diversification

The 3 months correlation between Alcoa and Fortuna is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Fortuna Silver Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortuna Silver Mines 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 Fortuna Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortuna Silver Mines has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Fortuna Silver go up and down completely randomly.

Pair Corralation between Alcoa Corp and Fortuna Silver

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Fortuna Silver. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 1.25 times less risky than Fortuna Silver. The stock trades about -0.07 of its potential returns per unit of risk. The Fortuna Silver Mines is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  449.00  in Fortuna Silver Mines on January 3, 2025 and sell it today you would earn a total of  164.00  from holding Fortuna Silver Mines or generate 36.53% return on investment over 90 days.

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

Alcoa Corp  vs.  Fortuna Silver Mines

Alcoa Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fortuna Silver Mines

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Fortuna Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Fortuna Silver

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

The idea behind Alcoa Corp and Fortuna Silver Mines 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..