Correlation Between Alcoa Corp and Kinross Gold

Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Kinross 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 Kinross 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 Kinross Gold, you can compare the effects of market volatilities on Alcoa Corp and Kinross 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 Kinross Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Kinross Gold.

Diversification Opportunities for Alcoa Corp and Kinross Gold

0.97

Correlation Coefficient

Alcoa Corp  Kinross Gold

Almost no diversification

The 3 months correlation between Alcoa and Kinross is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Kinross Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinross Gold 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 Kinross Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinross Gold has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Kinross Gold go up and down completely randomly.

Pair Corralation between Alcoa Corp and Kinross Gold

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.02 times less return on investment than Kinross Gold. In addition to that, Alcoa Corp is 1.19 times more volatile than Kinross Gold. It trades about 0.23 of its total potential returns per unit of risk. Kinross Gold is currently generating about 0.28 per unit of volatility. If you would invest  616.00  in Kinross Gold on January 31, 2024 and sell it today you would earn a total of  68.00  from holding Kinross Gold or generate 11.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Alcoa Corp  vs.  Kinross Gold

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.

Kinross Gold

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinross Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kinross Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alcoa Corp and Kinross Gold

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

The idea behind Alcoa Corp and Kinross Gold 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.