Correlation Between Alphabet and Galaxy Digital

Can any of the company-specific risk be diversified away by investing in both Alphabet and Galaxy Digital 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 Galaxy Digital 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 Galaxy Digital Holdings, you can compare the effects of market volatilities on Alphabet and Galaxy Digital 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 Galaxy Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Galaxy Digital.

Diversification Opportunities for Alphabet and Galaxy Digital

0.8

Correlation Coefficient

Alphabet  Galaxy Digital

Very poor diversification

The 3 months correlation between Alphabet and Galaxy is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Galaxy Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galaxy Digital Holdings 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 Galaxy Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galaxy Digital Holdings has no effect on the direction of Alphabet i.e., Alphabet and Galaxy Digital go up and down completely randomly.

Pair Corralation between Alphabet and Galaxy Digital

Assuming the 90 days trading horizon Alphabet is expected to generate 5.11 times less return on investment than Galaxy Digital. But when comparing it to its historical volatility, Alphabet Inc CDR is 4.01 times less risky than Galaxy Digital. It trades about 0.18 of its potential returns per unit of risk. Galaxy Digital Holdings is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,406  in Galaxy Digital Holdings on September 9, 2024 and sell it today you would earn a total of  1,584  from holding Galaxy Digital Holdings or generate 112.66% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Galaxy Digital Holdings

Alphabet CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Alphabet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Galaxy Digital Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Galaxy Digital Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Galaxy Digital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Galaxy Digital

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

The idea behind Alphabet Inc CDR and Galaxy Digital Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.