Correlation Between Alphabet and Hanwha Solutions

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

Diversification Opportunities for Alphabet and Hanwha Solutions

-0.7

Correlation Coefficient

Alphabet  Hanwha Solutions

Excellent diversification

The 3 months correlation between Alphabet and Hanwha is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions 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 Hanwha Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Solutions has no effect on the direction of Alphabet i.e., Alphabet and Hanwha Solutions go up and down completely randomly.

Pair Corralation between Alphabet and Hanwha Solutions

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.46 times more return on investment than Hanwha Solutions. However, Alphabet Inc Class C is 2.17 times less risky than Hanwha Solutions. It trades about 0.1 of its potential returns per unit of risk. Hanwha Solutions is currently generating about -0.19 per unit of risk. If you would invest  15,840  in Alphabet Inc Class C on September 3, 2024 and sell it today you would earn a total of  1,458  from holding Alphabet Inc Class C or generate 9.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.19%
Values	Daily Returns

Alphabet Inc Class C  vs.  Hanwha Solutions

Alphabet Class C

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hanwha Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alphabet and Hanwha Solutions

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

The idea behind Alphabet Inc Class C and Hanwha Solutions 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.