Correlation Between Alphabet and TPK Holding

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

Diversification Opportunities for Alphabet and TPK Holding

-0.7

Correlation Coefficient

Alphabet  TPK Holding

Excellent diversification

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

Pair Corralation between Alphabet and TPK Holding

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.81 times more return on investment than TPK Holding. However, Alphabet Inc Class C is 1.23 times less risky than TPK Holding. It trades about 0.09 of its potential returns per unit of risk. TPK Holding Co is currently generating about 0.04 per unit of risk. If you would invest  9,638  in Alphabet Inc Class C on September 16, 2024 and sell it today you would earn a total of  9,500  from holding Alphabet Inc Class C or generate 98.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.27%
Values	Daily Returns

Alphabet Inc Class C  vs.  TPK Holding Co

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.

TPK Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPK Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Alphabet and TPK Holding

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

The idea behind Alphabet Inc Class C and TPK Holding Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.