Correlation Between Alcoa Corp and Boeing

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

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

Diversification Opportunities for Alcoa Corp and Boeing

-0.86

Correlation Coefficient

Alcoa Corp  Boeing

Pay attention - limited upside

The 3 months correlation between Alcoa and Boeing is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Boeing go up and down completely randomly.

Pair Corralation between Alcoa Corp and Boeing

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.31 times more return on investment than Boeing. However, Alcoa Corp is 1.31 times more volatile than The Boeing. It trades about 0.03 of its potential returns per unit of risk. The Boeing is currently generating about -0.01 per unit of risk. If you would invest  3,634  in Alcoa Corp on February 6, 2024 and sell it today you would earn a total of  43.00  from holding Alcoa Corp or generate 1.18% return on investment over 90 days.

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

Alcoa Corp  vs.  The Boeing

Alcoa Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 13 (%) 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.

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alcoa Corp and Boeing

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

The idea behind Alcoa Corp and The Boeing 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.