Correlation Between Alphabet and Hong Tai

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

Diversification Opportunities for Alphabet and Hong Tai

0.51

Correlation Coefficient

Alphabet  Hong Tai

Very weak diversification

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

Pair Corralation between Alphabet and Hong Tai

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.96 times more return on investment than Hong Tai. However, Alphabet is 1.96 times more volatile than Hong Tai Electric. It trades about 0.22 of its potential returns per unit of risk. Hong Tai Electric is currently generating about 0.09 per unit of risk. If you would invest  17,369  in Alphabet Inc Class C on September 16, 2024 and sell it today you would earn a total of  1,769  from holding Alphabet Inc Class C or generate 10.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Alphabet Inc Class C  vs.  Hong Tai Electric

Alphabet Class C

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Hong Tai Electric

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Tai Electric are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hong Tai 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 Hong Tai

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

The idea behind Alphabet Inc Class C and Hong Tai Electric 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.