Correlation Between Alphabet and Solution Financial

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

Diversification Opportunities for Alphabet and Solution Financial

0.04

Correlation Coefficient

Alphabet  Solution Financial

Significant diversification

The 3 months correlation between Alphabet and Solution is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Alphabet i.e., Alphabet and Solution Financial go up and down completely randomly.

Pair Corralation between Alphabet and Solution Financial

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to under-perform the Solution Financial. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc CDR is 1.11 times less risky than Solution Financial. The stock trades about -0.12 of its potential returns per unit of risk. The Solution Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Solution Financial on December 24, 2024 and sell it today you would earn a total of  1.00  from holding Solution Financial or generate 3.57% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Solution 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 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.

Solution Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Solution Financial

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

The idea behind Alphabet Inc CDR and Solution 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.

Check out your portfolio center.

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.