Correlation Between Alphabet and Plaza Retail

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

Diversification Opportunities for Alphabet and Plaza Retail

-0.68

Correlation Coefficient

Alphabet  Plaza Retail

Excellent diversification

The 3 months correlation between Alphabet and Plaza is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Plaza Retail REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Retail REIT 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 Plaza Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Retail REIT has no effect on the direction of Alphabet i.e., Alphabet and Plaza Retail go up and down completely randomly.

Pair Corralation between Alphabet and Plaza Retail

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to generate 1.76 times more return on investment than Plaza Retail. However, Alphabet is 1.76 times more volatile than Plaza Retail REIT. It trades about 0.08 of its potential returns per unit of risk. Plaza Retail REIT is currently generating about -0.02 per unit of risk. If you would invest  1,554  in Alphabet Inc CDR on December 1, 2024 and sell it today you would earn a total of  1,301  from holding Alphabet Inc CDR or generate 83.72% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Plaza Retail REIT

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 rather sound technical and fundamental indicators, Alphabet is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Plaza Retail REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plaza Retail REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Plaza Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Plaza Retail

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

The idea behind Alphabet Inc CDR and Plaza Retail REIT 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .