Correlation Between Alphabet and Shanghai Jin

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

Diversification Opportunities for Alphabet and Shanghai Jin

0.31

Correlation Coefficient

Alphabet  Shanghai Jin

Weak diversification

The 3 months correlation between Alphabet and Shanghai is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Shanghai Jin Jiang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Jin Jiang 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 Shanghai Jin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Jin Jiang has no effect on the direction of Alphabet i.e., Alphabet and Shanghai Jin go up and down completely randomly.

Pair Corralation between Alphabet and Shanghai Jin

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.08 times more return on investment than Shanghai Jin. However, Alphabet is 1.08 times more volatile than Shanghai Jin Jiang. It trades about 0.09 of its potential returns per unit of risk. Shanghai Jin Jiang is currently generating about -0.03 per unit of risk. If you would invest  10,310  in Alphabet Inc Class C on September 26, 2024 and sell it today you would earn a total of  9,447  from holding Alphabet Inc Class C or generate 91.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.05%
Values	Daily Returns

Alphabet Inc Class C  vs.  Shanghai Jin Jiang

Alphabet Class C

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Shanghai Jin Jiang

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Jin Jiang are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Jin 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 Shanghai Jin

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

The idea behind Alphabet Inc Class C and Shanghai Jin Jiang 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.