Correlation Between Alphabet and MTY Food

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

Diversification Opportunities for Alphabet and MTY Food

0.69

Correlation Coefficient

Alphabet  MTY Food

Poor diversification

The 3 months correlation between Alphabet and MTY is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and MTY Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTY Food Group 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 MTY Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTY Food Group has no effect on the direction of Alphabet i.e., Alphabet and MTY Food go up and down completely randomly.

Pair Corralation between Alphabet and MTY Food

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to generate 1.12 times more return on investment than MTY Food. However, Alphabet is 1.12 times more volatile than MTY Food Group. It trades about 0.21 of its potential returns per unit of risk. MTY Food Group is currently generating about 0.16 per unit of risk. If you would invest  2,644  in Alphabet Inc CDR on September 13, 2024 and sell it today you would earn a total of  632.00  from holding Alphabet Inc CDR or generate 23.9% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  MTY Food Group

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.

MTY Food Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MTY Food displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and MTY Food

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

The idea behind Alphabet Inc CDR and MTY Food Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.