Correlation Between AMERICAN BEACON and Alcoa Corp

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Can any of the company-specific risk be diversified away by investing in both AMERICAN BEACON 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 BEACON 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 BEACON MID-CAP and Alcoa Corp, you can compare the effects of market volatilities on AMERICAN BEACON 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 BEACON with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMERICAN BEACON and Alcoa Corp.

Diversification Opportunities for AMERICAN BEACON and Alcoa Corp

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between AMERICAN and Alcoa is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AMERICAN BEACON MID-CAP and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and AMERICAN BEACON 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 BEACON MID-CAP 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 BEACON i.e., AMERICAN BEACON and Alcoa Corp go up and down completely randomly.

Pair Corralation between AMERICAN BEACON and Alcoa Corp

If you would invest  3,777  in Alcoa Corp on September 3, 2022 and sell it today you would earn a total of  1,133  from holding Alcoa Corp or generate 30.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy61.9%
ValuesDaily Returns

AMERICAN BEACON MID-CAP  vs.  Alcoa Corp

 Performance (%) 
       Timeline  
AMERICAN BEACON MID-CAP 
AMERICAN Performance
0 of 100
Over the last 90 days AMERICAN BEACON MID-CAP has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, AMERICAN BEACON may actually be approaching a critical reversion point that can send shares even higher in January 2023.
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 BEACON and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AMERICAN BEACON and Alcoa Corp

The main advantage of trading using opposite AMERICAN BEACON and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMERICAN BEACON 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 BEACON MID-CAP 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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