Correlation Between Alphabet and Good Finance

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

Diversification Opportunities for Alphabet and Good Finance

-0.18

Correlation Coefficient

Alphabet  Good Finance

Good diversification

The 3 months correlation between Alphabet and Good is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Good Finance Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Finance Securities 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 Good Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Finance Securities has no effect on the direction of Alphabet i.e., Alphabet and Good Finance go up and down completely randomly.

Pair Corralation between Alphabet and Good Finance

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.87 times more return on investment than Good Finance. However, Alphabet Inc Class C is 1.15 times less risky than Good Finance. It trades about 0.19 of its potential returns per unit of risk. Good Finance Securities is currently generating about 0.06 per unit of risk. If you would invest  16,063  in Alphabet Inc Class C on September 18, 2024 and sell it today you would earn a total of  3,648  from holding Alphabet Inc Class C or generate 22.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Good Finance Securities

Alphabet Class C

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 15 (%) 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.

Good Finance Securities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Good Finance Securities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Good Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alphabet and Good Finance

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

The idea behind Alphabet Inc Class C and Good Finance Securities 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 Correlations module to find global opportunities by holding instruments from different markets.