Correlation Between Alcoa Corp and Build Funds

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

Diversification Opportunities for Alcoa Corp and Build Funds

  Correlation Coefficient

Poor diversification

The 3 months correlation between Alcoa and Build is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Build Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build Funds Trust 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 Build Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build Funds Trust has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Build Funds go up and down completely randomly.

Pair Corralation between Alcoa Corp and Build Funds

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 12.91 times more return on investment than Build Funds. However, Alcoa Corp is 12.91 times more volatile than Build Funds Trust. It trades about 0.04 of its potential returns per unit of risk. Build Funds Trust is currently generating about 0.1 per unit of risk. If you would invest  3,398  in Alcoa Corp on February 18, 2024 and sell it today you would earn a total of  724.00  from holding Alcoa Corp or generate 21.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Alcoa Corp  vs.  Build Funds Trust

Alcoa Corp 

Risk-Adjusted Performance

19 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.
Build Funds Trust 

Risk-Adjusted Performance

12 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Build Funds Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Build Funds is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Alcoa Corp and Build Funds Volatility Contrast

   Predicted Return Density   

Pair Trading with Alcoa Corp and Build Funds

The main advantage of trading using opposite Alcoa Corp and Build Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Build Funds 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 Build Funds will offset losses from the drop in Build Funds' long position.
The idea behind Alcoa Corp and Build Funds Trust 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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