Correlation Between Alcoa Corp and Equinox Gold

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

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

Diversification Opportunities for Alcoa Corp and Equinox Gold

0.74

Correlation Coefficient

Alcoa Corp  Equinox Gold

Poor diversification

The 3 months correlation between Alcoa and Equinox is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Equinox Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinox Gold Corp 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 Equinox Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinox Gold Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Equinox Gold go up and down completely randomly.

Pair Corralation between Alcoa Corp and Equinox Gold

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.92 times more return on investment than Equinox Gold. However, Alcoa Corp is 1.08 times less risky than Equinox Gold. It trades about 0.27 of its potential returns per unit of risk. Equinox Gold Corp is currently generating about 0.18 per unit of risk. If you would invest  2,758  in Alcoa Corp on February 22, 2024 and sell it today you would earn a total of  1,651  from holding Alcoa Corp or generate 59.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Alcoa Corp  vs.  Equinox Gold Corp

Alcoa Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Equinox Gold Corp

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equinox Gold Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Equinox Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Equinox Gold

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

The idea behind Alcoa Corp and Equinox Gold Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.