Correlation Between Alphabet and Shenzhen United

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

Diversification Opportunities for Alphabet and Shenzhen United

0.37

Correlation Coefficient

Alphabet  Shenzhen United

Weak diversification

The 3 months correlation between Alphabet and Shenzhen is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Shenzhen United Winners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen United Winners 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 Shenzhen United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen United Winners has no effect on the direction of Alphabet i.e., Alphabet and Shenzhen United go up and down completely randomly.

Pair Corralation between Alphabet and Shenzhen United

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.47 times more return on investment than Shenzhen United. However, Alphabet Inc Class C is 2.12 times less risky than Shenzhen United. It trades about 0.07 of its potential returns per unit of risk. Shenzhen United Winners is currently generating about -0.02 per unit of risk. If you would invest  14,119  in Alphabet Inc Class C on October 5, 2024 and sell it today you would earn a total of  5,194  from holding Alphabet Inc Class C or generate 36.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.42%
Values	Daily Returns

Alphabet Inc Class C  vs.  Shenzhen United Winners

Alphabet Class C

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen United Winners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen United Winners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen United is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Shenzhen United

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

The idea behind Alphabet Inc Class C and Shenzhen United Winners 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.

Check out your portfolio center.

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.