Correlation Between Alcoa Corp and Vanguard Mega

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

Diversification Opportunities for Alcoa Corp and Vanguard Mega

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alcoa and Vanguard is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap 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 Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Vanguard Mega go up and down completely randomly.

Pair Corralation between Alcoa Corp and Vanguard Mega

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 3.13 times more return on investment than Vanguard Mega. However, Alcoa Corp is 3.13 times more volatile than Vanguard Mega Cap. It trades about 0.44 of its potential returns per unit of risk. Vanguard Mega Cap is currently generating about 0.09 per unit of risk. If you would invest  2,622  in Alcoa Corp on December 30, 2023 and sell it today you would earn a total of  757.00  from holding Alcoa Corp or generate 28.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Vanguard Mega Cap

 Performance 
       Timeline  
Alcoa Corp 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Vanguard Mega Cap 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Vanguard Mega may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Alcoa Corp and Vanguard Mega Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Vanguard Mega

The main advantage of trading using opposite Alcoa Corp and Vanguard Mega positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Vanguard Mega 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 Vanguard Mega will offset losses from the drop in Vanguard Mega's long position.
The idea behind Alcoa Corp and Vanguard Mega Cap 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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