Correlation Between Alphabet and Hainan Development

Can any of the company-specific risk be diversified away by investing in both Alphabet and Hainan Development 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 Hainan Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class C and Hainan Development Holdings, you can compare the effects of market volatilities on Alphabet and Hainan Development 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 Hainan Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Hainan Development.

Diversification Opportunities for Alphabet and Hainan Development

-0.36

Correlation Coefficient

Alphabet  Hainan Development

Very good diversification

The 3 months correlation between Alphabet and Hainan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Hainan Development Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Development 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 Class C are associated (or correlated) with Hainan Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Development has no effect on the direction of Alphabet i.e., Alphabet and Hainan Development go up and down completely randomly.

Pair Corralation between Alphabet and Hainan Development

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Hainan Development. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.61 times less risky than Hainan Development. The stock trades about -0.14 of its potential returns per unit of risk. The Hainan Development Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  983.00  in Hainan Development Holdings on December 24, 2024 and sell it today you would earn a total of  23.00  from holding Hainan Development Holdings or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Alphabet Inc Class C  vs.  Hainan Development Holdings

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hainan Development

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Development Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hainan Development 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 Hainan Development

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

The idea behind Alphabet Inc Class C and Hainan Development Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.