Correlation Between Alcoa Corp and Deutsche Real

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

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

Diversification Opportunities for Alcoa Corp and Deutsche Real

0.66

Correlation Coefficient

Alcoa Corp  Deutsche Real

Poor diversification

The 3 months correlation between Alcoa and Deutsche is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Deutsche Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Real Assets 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 Deutsche Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Real Assets has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Deutsche Real go up and down completely randomly.

Pair Corralation between Alcoa Corp and Deutsche Real

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 3.48 times more return on investment than Deutsche Real. However, Alcoa Corp is 3.48 times more volatile than Deutsche Real Assets. It trades about 0.28 of its potential returns per unit of risk. Deutsche Real Assets is currently generating about -0.03 per unit of risk. If you would invest  3,158  in Alcoa Corp on January 26, 2024 and sell it today you would earn a total of  450.00  from holding Alcoa Corp or generate 14.25% 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.  Deutsche Real Assets

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 weak basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Real Assets

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Real Assets are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alcoa Corp and Deutsche Real

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

The idea behind Alcoa Corp and Deutsche Real Assets 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.