Correlation Between Alphabet and Eguana Technologies

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

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

Diversification Opportunities for Alphabet and Eguana Technologies

0.28

Correlation Coefficient

Alphabet  Eguana Technologies

Modest diversification

The 3 months correlation between Alphabet and Eguana is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Eguana Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eguana Technologies and Alphabet 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 Alphabet Inc CDR are associated (or correlated) with Eguana Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eguana Technologies has no effect on the direction of Alphabet i.e., Alphabet and Eguana Technologies go up and down completely randomly.

Pair Corralation between Alphabet and Eguana Technologies

Assuming the 90 days trading horizon Alphabet is expected to generate 2.24 times less return on investment than Eguana Technologies. But when comparing it to its historical volatility, Alphabet Inc CDR is 8.54 times less risky than Eguana Technologies. It trades about 0.21 of its potential returns per unit of risk. Eguana Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Eguana Technologies on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Eguana Technologies or generate 0.0% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Eguana Technologies

Alphabet CDR

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc CDR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Alphabet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Eguana Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eguana Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Eguana Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Eguana Technologies

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

The idea behind Alphabet Inc CDR and Eguana Technologies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..