Correlation Between Alphabet and Lelon Electronics

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

Diversification Opportunities for Alphabet and Lelon Electronics

0.2

Correlation Coefficient

Alphabet  Lelon Electronics

Modest diversification

The 3 months correlation between Alphabet and Lelon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Lelon Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lelon Electronics Corp 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 Lelon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lelon Electronics Corp has no effect on the direction of Alphabet i.e., Alphabet and Lelon Electronics go up and down completely randomly.

Pair Corralation between Alphabet and Lelon Electronics

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Lelon Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.52 times less risky than Lelon Electronics. The stock trades about -0.42 of its potential returns per unit of risk. The Lelon Electronics Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  9,230  in Lelon Electronics Corp on December 5, 2024 and sell it today you would lose (410.00) from holding Lelon Electronics Corp or give up 4.44% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  Lelon Electronics Corp

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.

Lelon Electronics Corp

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Alphabet Inc Class C and Lelon Electronics Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.