Correlation Between SPDR SP and Alcoa Corp

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

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

Diversification Opportunities for SPDR SP and Alcoa Corp

-0.09

Correlation Coefficient

SPDR SP  Alcoa Corp

Good diversification

The 3 months correlation between SPDR and Alcoa is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Retail and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and SPDR SP 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 SPDR SP Retail 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 SPDR SP i.e., SPDR SP and Alcoa Corp go up and down completely randomly.

Pair Corralation between SPDR SP and Alcoa Corp

Considering the 90-day investment horizon SPDR SP Retail is expected to under-perform the Alcoa Corp. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SP Retail is 2.19 times less risky than Alcoa Corp. The etf trades about -0.33 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,402  in Alcoa Corp on February 1, 2024 and sell it today you would earn a total of  112.00  from holding Alcoa Corp or generate 3.29% return on investment over 90 days.

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

SPDR SP Retail  vs.  Alcoa Corp

SPDR SP Retail

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Retail are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with SPDR SP and Alcoa Corp

The main advantage of trading using opposite SPDR SP and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Retail 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.