Correlation Between Alcoa Corp and Intel

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

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

Diversification Opportunities for Alcoa Corp and Intel

-0.66

Correlation Coefficient

Alcoa Corp  Intel

Excellent diversification

The 3 months correlation between Alcoa and Intel is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Intel go up and down completely randomly.

Pair Corralation between Alcoa Corp and Intel

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.91 times more return on investment than Intel. However, Alcoa Corp is 1.1 times less risky than Intel. It trades about 0.26 of its potential returns per unit of risk. Intel is currently generating about -0.33 per unit of risk. If you would invest  3,135  in Alcoa Corp on January 20, 2024 and sell it today you would earn a total of  412.00  from holding Alcoa Corp or generate 13.14% return on investment over 90 days.

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

Alcoa Corp  vs.  Intel

Alcoa Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 11 (%) 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.

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Alcoa Corp and Intel

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

The idea behind Alcoa Corp and Intel 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.