Correlation Between AMERICAN FUNDS and Alcoa Corp

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Can any of the company-specific risk be diversified away by investing in both AMERICAN FUNDS 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 AMERICAN FUNDS and Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMERICAN FUNDS 2010 and Alcoa Corp, you can compare the effects of market volatilities on AMERICAN FUNDS 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 AMERICAN FUNDS with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMERICAN FUNDS and Alcoa Corp.

Diversification Opportunities for AMERICAN FUNDS and Alcoa Corp

  Correlation Coefficient

Very poor diversification

The 3 months correlation between AMERICAN and Alcoa is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AMERICAN FUNDS 2010 and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and AMERICAN FUNDS 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 AMERICAN FUNDS 2010 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 AMERICAN FUNDS i.e., AMERICAN FUNDS and Alcoa Corp go up and down completely randomly.

Pair Corralation between AMERICAN FUNDS and Alcoa Corp

Assuming the 90 days horizon AMERICAN FUNDS is expected to generate 67.16 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, AMERICAN FUNDS 2010 is 7.76 times less risky than Alcoa Corp. It trades about 0.01 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,155  in Alcoa Corp on September 3, 2022 and sell it today you would earn a total of  2,755  from holding Alcoa Corp or generate 127.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

AMERICAN FUNDS 2010  vs.  Alcoa Corp

 Performance (%) 
AMERICAN Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FUNDS 2010 are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, AMERICAN FUNDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AMERICAN Price Channel

Alcoa Corp 
Alcoa Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Alcoa Corp may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Alcoa Price Channel

AMERICAN FUNDS and Alcoa Corp Volatility Contrast

   Predicted Return Density   

Pair Trading with AMERICAN FUNDS and Alcoa Corp

The main advantage of trading using opposite AMERICAN FUNDS and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMERICAN FUNDS 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.
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The idea behind AMERICAN FUNDS 2010 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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