Correlation Between Alcoa Corp and Almaden Minerals

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

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

Diversification Opportunities for Alcoa Corp and Almaden Minerals

0.38

Correlation Coefficient

Alcoa Corp  Almaden Minerals

Weak diversification

The 3 months correlation between Alcoa and Almaden is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Almaden Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almaden Minerals 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 Almaden Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almaden Minerals has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Almaden Minerals go up and down completely randomly.

Pair Corralation between Alcoa Corp and Almaden Minerals

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.6 times more return on investment than Almaden Minerals. However, Alcoa Corp is 1.67 times less risky than Almaden Minerals. It trades about -0.01 of its potential returns per unit of risk. Almaden Minerals is currently generating about -0.04 per unit of risk. If you would invest  5,973  in Alcoa Corp on February 14, 2024 and sell it today you would lose (1,957) from holding Alcoa Corp or give up 32.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.94%
Values	Daily Returns

Alcoa Corp  vs.  Almaden Minerals

Alcoa Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Almaden Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almaden Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alcoa Corp and Almaden Minerals

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

The idea behind Alcoa Corp and Almaden Minerals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.