Correlation Between Intel Corp and Alcoa Corp

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

Diversification Opportunities for Intel Corp and Alcoa Corp

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Intel and Alcoa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Intel Corp and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp and Intel 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 Intel 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 Intel Corp i.e., Intel Corp and Alcoa Corp go up and down completely randomly.

Pair Corralation between Intel Corp and Alcoa Corp

Given the investment horizon of 90 days Intel Corp is expected to under-perform the Alcoa Corp. But the stock apears to be less risky and, when comparing its historical volatility, Intel Corp is 1.04 times less risky than Alcoa Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,264  in Alcoa Corp on May 10, 2022 and sell it today you would earn a total of  601.00  from holding Alcoa Corp or generate 14.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Intel Corp  vs.  Alcoa Corp

 Performance (%) 
       Timeline  
Intel Corp 
Intel Performance
0 of 100
Over the last 90 days Intel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Intel 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 latest weak 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

Intel Corp and Alcoa Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Intel Corp and Alcoa Corp

The main advantage of trading using opposite Intel Corp and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel Corp 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.
The idea behind Intel 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.
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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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