Correlation Between Alcoa Corp and Linamar

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

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

Diversification Opportunities for Alcoa Corp and Linamar

0.59

Correlation Coefficient

Alcoa Corp  Linamar

Very weak diversification

The 3 months correlation between Alcoa and Linamar is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Linamar go up and down completely randomly.

Pair Corralation between Alcoa Corp and Linamar

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.33 times less return on investment than Linamar. In addition to that, Alcoa Corp is 1.51 times more volatile than Linamar. It trades about 0.15 of its total potential returns per unit of risk. Linamar is currently generating about 0.29 per unit of volatility. If you would invest  3,671  in Linamar on May 1, 2025 and sell it today you would earn a total of  1,332  from holding Linamar or generate 36.28% return on investment over 90 days.

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

Alcoa Corp  vs.  Linamar

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.

Linamar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Linamar are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Linamar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Linamar

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

The idea behind Alcoa Corp and Linamar 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.