Correlation Between Alphabet and IA Financial

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

Diversification Opportunities for Alphabet and IA Financial

0.24

Correlation Coefficient

Alphabet  IA Financial

Modest diversification

The 3 months correlation between Alphabet and IAG is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial 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 IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of Alphabet i.e., Alphabet and IA Financial go up and down completely randomly.

Pair Corralation between Alphabet and IA Financial

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to under-perform the IA Financial. In addition to that, Alphabet is 1.19 times more volatile than iA Financial. It trades about -0.12 of its total potential returns per unit of risk. iA Financial is currently generating about 0.02 per unit of volatility. If you would invest  13,251  in iA Financial on December 23, 2024 and sell it today you would earn a total of  181.00  from holding iA Financial or generate 1.37% 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.  iA Financial

Alphabet CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

iA Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IA Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and IA Financial

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

The idea behind Alphabet Inc CDR and iA Financial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.