Correlation Between WuXi Biologics and Alcoa Corp

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

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

Diversification Opportunities for WuXi Biologics and Alcoa Corp

-0.6

Correlation Coefficient

WuXi Biologics  Alcoa Corp

Excellent diversification

The 3 months correlation between WuXi and Alcoa is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding WuXi Biologics and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and WuXi Biologics 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 WuXi Biologics are associated (or correlated) with Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of WuXi Biologics i.e., WuXi Biologics and Alcoa Corp go up and down completely randomly.

Pair Corralation between WuXi Biologics and Alcoa Corp

Assuming the 90 days horizon WuXi Biologics is expected to under-perform the Alcoa Corp. In addition to that, WuXi Biologics is 1.92 times more volatile than Alcoa Corp. It trades about -0.17 of its total potential returns per unit of risk. Alcoa Corp is currently generating about 0.12 per unit of volatility. If you would invest  2,977  in Alcoa Corp on January 25, 2024 and sell it today you would earn a total of  629.00  from holding Alcoa Corp or generate 21.13% return on investment over 90 days.

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

WuXi Biologics  vs.  Alcoa Corp

WuXi Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WuXi Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alcoa Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 9 (%) 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.

Pair Trading with WuXi Biologics and Alcoa Corp

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

The idea behind WuXi Biologics and Alcoa 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.