Correlation Between Alcoa Corp and IShares International

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

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

Diversification Opportunities for Alcoa Corp and IShares International

0.62

Correlation Coefficient

Alcoa Corp  IShares International

Poor diversification

The 3 months correlation between Alcoa and IShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International 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 IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and IShares International go up and down completely randomly.

Pair Corralation between Alcoa Corp and IShares International

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 4.13 times more return on investment than IShares International. However, Alcoa Corp is 4.13 times more volatile than iShares International Select. It trades about 0.32 of its potential returns per unit of risk. iShares International Select is currently generating about 0.02 per unit of risk. If you would invest  3,397  in Alcoa Corp on July 19, 2024 and sell it today you would earn a total of  810.00  from holding Alcoa Corp or generate 23.84% return on investment over 90 days.

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

Alcoa Corp  vs.  iShares International Select

Alcoa Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

iShares International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Select are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, IShares International is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alcoa Corp and IShares International

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

The idea behind Alcoa Corp and iShares International Select 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.