Correlation Between Alphabet and YTL Hospitality

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

Diversification Opportunities for Alphabet and YTL Hospitality

0.06

Correlation Coefficient

Alphabet  YTL Hospitality

Significant diversification

The 3 months correlation between Alphabet and YTL is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and YTL Hospitality REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YTL Hospitality REIT 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 YTL Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YTL Hospitality REIT has no effect on the direction of Alphabet i.e., Alphabet and YTL Hospitality go up and down completely randomly.

Pair Corralation between Alphabet and YTL Hospitality

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.9 times more return on investment than YTL Hospitality. However, Alphabet is 1.9 times more volatile than YTL Hospitality REIT. It trades about 0.01 of its potential returns per unit of risk. YTL Hospitality REIT is currently generating about -0.13 per unit of risk. If you would invest  17,030  in Alphabet Inc Class C on November 29, 2024 and sell it today you would lose (9.00) from holding Alphabet Inc Class C or give up 0.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Alphabet Inc Class C  vs.  YTL Hospitality REIT

Alphabet Class C

Risk-Adjusted Performance

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.

YTL Hospitality REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days YTL Hospitality REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Alphabet and YTL Hospitality

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

The idea behind Alphabet Inc Class C and YTL Hospitality REIT 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.