Correlation Between Alphabet and Touchstone Exploration

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

Diversification Opportunities for Alphabet and Touchstone Exploration

0.51

Correlation Coefficient

Alphabet  Touchstone Exploration

Very weak diversification

The 3 months correlation between Alphabet and Touchstone is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Touchstone Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Exploration 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 Touchstone Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Exploration has no effect on the direction of Alphabet i.e., Alphabet and Touchstone Exploration go up and down completely randomly.

Pair Corralation between Alphabet and Touchstone Exploration

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to under-perform the Touchstone Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc CDR is 1.79 times less risky than Touchstone Exploration. The stock trades about -0.08 of its potential returns per unit of risk. The Touchstone Exploration is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Touchstone Exploration on December 25, 2024 and sell it today you would earn a total of  1.00  from holding Touchstone Exploration or generate 2.38% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Touchstone Exploration

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Touchstone Exploration

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Touchstone Exploration may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alphabet and Touchstone Exploration

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

The idea behind Alphabet Inc CDR and Touchstone Exploration 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.