Correlation Between Ero Copper and Alcoa Corp

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

Diversification Opportunities for Ero Copper and Alcoa Corp

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Ero Copper and Alcoa is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Ero Copper 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 Ero Copper Corp 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 Ero Copper i.e., Ero Copper and Alcoa Corp go up and down completely randomly.

Pair Corralation between Ero Copper and Alcoa Corp

Considering the 90-day investment horizon Ero Copper Corp is expected to generate 1.18 times more return on investment than Alcoa Corp. However, Ero Copper is 1.18 times more volatile than Alcoa Corp. It trades about 0.12 of its potential returns per unit of risk. Alcoa Corp is currently generating about -0.07 per unit of risk. If you would invest  833.00  in Ero Copper Corp on July 4, 2022 and sell it today you would earn a total of  267.00  from holding Ero Copper Corp or generate 32.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ero Copper Corp  vs.  Alcoa Corp

 Performance (%) 
       Timeline  
Ero Copper Corp 
Ero Copper Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ero Copper Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Ero Copper disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ero Copper Price Channel

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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Alcoa Price Channel

Ero Copper and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ero Copper and Alcoa Corp

The main advantage of trading using opposite Ero Copper and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ero Copper 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.
Ero Copper vs. Microsoft Corp
The idea behind Ero Copper Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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