Correlation Between Alcoa Corp and Exxon

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

Diversification Opportunities for Alcoa Corp and Exxon

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alcoa and Exxon is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Exxon go up and down completely randomly.

Pair Corralation between Alcoa Corp and Exxon

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Exxon. In addition to that, Alcoa Corp is 1.78 times more volatile than Exxon Mobil Corp. It trades about -0.12 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.06 per unit of volatility. If you would invest  8,684  in Exxon Mobil Corp on July 7, 2022 and sell it today you would earn a total of  1,228  from holding Exxon Mobil Corp or generate 14.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  Exxon Mobil Corp

 Performance (%) 
       Timeline  
Alcoa Corp 
Alcoa Performance
0 of 100
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alcoa Price Channel

Exxon Mobil Corp 
Exxon Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

Alcoa Corp and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and Exxon

The main advantage of trading using opposite Alcoa Corp and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
Alcoa Corp vs. Amazon Inc
The idea behind Alcoa Corp and Exxon Mobil 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.
Exxon vs. Chevron Corp
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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