Correlation Between Alphabet and China Infrastructure

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

Diversification Opportunities for Alphabet and China Infrastructure

-0.24

Correlation Coefficient

Alphabet  China Infrastructure

Very good diversification

The 3 months correlation between Alphabet and China is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and China Infrastructure Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Infrastructure 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 China Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Infrastructure has no effect on the direction of Alphabet i.e., Alphabet and China Infrastructure go up and down completely randomly.

Pair Corralation between Alphabet and China Infrastructure

Given the investment horizon of 90 days Alphabet is expected to generate 6.57 times less return on investment than China Infrastructure. But when comparing it to its historical volatility, Alphabet Inc Class C is 7.06 times less risky than China Infrastructure. It trades about 0.06 of its potential returns per unit of risk. China Infrastructure Construction is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.04  in China Infrastructure Construction on August 31, 2024 and sell it today you would earn a total of  0.00  from holding China Infrastructure Construction or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.56%
Values	Daily Returns

Alphabet Inc Class C  vs.  China Infrastructure Construct

Alphabet Class C

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in December 2024.

China Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Infrastructure Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, China Infrastructure is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alphabet and China Infrastructure

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

The idea behind Alphabet Inc Class C and China Infrastructure Construction 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.