Correlation Between Alphabet and Arkema SA

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

Diversification Opportunities for Alphabet and Arkema SA

0.07

Correlation Coefficient

Alphabet  Arkema SA

Significant diversification

The 3 months correlation between Alphabet and Arkema is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Arkema SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA 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 Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA has no effect on the direction of Alphabet i.e., Alphabet and Arkema SA go up and down completely randomly.

Pair Corralation between Alphabet and Arkema SA

Given the investment horizon of 90 days Alphabet is expected to generate 10.24 times less return on investment than Arkema SA. In addition to that, Alphabet is 1.9 times more volatile than Arkema SA. It trades about 0.01 of its total potential returns per unit of risk. Arkema SA is currently generating about 0.15 per unit of volatility. If you would invest  7,592  in Arkema SA on December 1, 2024 and sell it today you would earn a total of  473.00  from holding Arkema SA or generate 6.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	65.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Arkema SA

Alphabet Class C

Risk-Adjusted Performance

Very 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.

Arkema SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arkema SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Arkema SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alphabet and Arkema SA

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

The idea behind Alphabet Inc Class C and Arkema SA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..