Correlation Between Fidelity National and Alphabet

Can any of the company-specific risk be diversified away by investing in both Fidelity National and Alphabet 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 Fidelity National and Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity National Information and Alphabet, you can compare the effects of market volatilities on Fidelity National and Alphabet 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 Fidelity National with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity National and Alphabet.

Diversification Opportunities for Fidelity National and Alphabet

0.77

Correlation Coefficient

Fidelity National  Alphabet

Poor diversification

The 3 months correlation between Fidelity and Alphabet is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet and Fidelity National 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 Fidelity National Information are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Fidelity National i.e., Fidelity National and Alphabet go up and down completely randomly.

Pair Corralation between Fidelity National and Alphabet

Assuming the 90 days trading horizon Fidelity National is expected to generate 1.75 times less return on investment than Alphabet. But when comparing it to its historical volatility, Fidelity National Information is 1.24 times less risky than Alphabet. It trades about 0.12 of its potential returns per unit of risk. Alphabet is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,356  in Alphabet on September 5, 2024 and sell it today you would earn a total of  1,401  from holding Alphabet or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fidelity National Information  vs.  Alphabet

Fidelity National

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fidelity National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alphabet

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alphabet sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidelity National and Alphabet

The main advantage of trading using opposite Fidelity National and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity National position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.

The idea behind Fidelity National Information and Alphabet 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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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 the Commodity Directory module to find actively traded commodities issued by global exchanges.