Correlation Between Alphabet and Laurentian Bank

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

Diversification Opportunities for Alphabet and Laurentian Bank

0.73

Correlation Coefficient

Alphabet  Laurentian Bank

Poor diversification

The 3 months correlation between Alphabet and Laurentian is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank 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 Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Alphabet i.e., Alphabet and Laurentian Bank go up and down completely randomly.

Pair Corralation between Alphabet and Laurentian Bank

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to under-perform the Laurentian Bank. In addition to that, Alphabet is 2.19 times more volatile than Laurentian Bank. It trades about -0.1 of its total potential returns per unit of risk. Laurentian Bank is currently generating about -0.05 per unit of volatility. If you would invest  2,825  in Laurentian Bank on December 25, 2024 and sell it today you would lose (95.00) from holding Laurentian Bank or give up 3.36% of portfolio value over 90 days.

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

Alphabet Inc CDR  vs.  Laurentian Bank

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 unfluctuating 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.

Laurentian Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laurentian Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Laurentian Bank is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Laurentian Bank

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

The idea behind Alphabet Inc CDR and Laurentian Bank 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.