Correlation Between Alphabet and Tung Ho

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

Diversification Opportunities for Alphabet and Tung Ho

0.73

Correlation Coefficient

Alphabet  Tung Ho

Poor diversification

The 3 months correlation between Alphabet and Tung is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile 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 Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Alphabet i.e., Alphabet and Tung Ho go up and down completely randomly.

Pair Corralation between Alphabet and Tung Ho

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.03 times more return on investment than Tung Ho. However, Alphabet is 1.03 times more volatile than Tung Ho Textile. It trades about 0.08 of its potential returns per unit of risk. Tung Ho Textile is currently generating about 0.04 per unit of risk. If you would invest  9,391  in Alphabet Inc Class C on December 3, 2024 and sell it today you would earn a total of  7,831  from holding Alphabet Inc Class C or generate 83.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.37%
Values	Daily Returns

Alphabet Inc Class C  vs.  Tung Ho Textile

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 nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tung Ho Textile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tung Ho Textile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tung Ho is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alphabet and Tung Ho

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

The idea behind Alphabet Inc Class C and Tung Ho Textile 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.