Correlation Between Alcoa Corp and Intel

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Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Intel 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 Intel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Intel, you can compare the effects of market volatilities on Alcoa Corp and Intel 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 Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Intel.

Diversification Opportunities for Alcoa Corp and Intel

0.46
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Alcoa Corp and Intel

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Intel. In addition to that, Alcoa Corp is 1.33 times more volatile than Intel. It trades about -0.01 of its total potential returns per unit of risk. Intel is currently generating about 0.06 per unit of volatility. If you would invest  3,244  in Intel on December 29, 2023 and sell it today you would earn a total of  1,133  from holding Intel or generate 34.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Intel

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Intel 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Alcoa Corp and Intel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Intel

The main advantage of trading using opposite Alcoa Corp and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.
The idea behind Alcoa Corp and Intel 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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