Correlation Between Alphabet and CMC Investment

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

Diversification Opportunities for Alphabet and CMC Investment

-0.74

Correlation Coefficient

Alphabet  CMC Investment

Pay attention - limited upside

The 3 months correlation between Alphabet and CMC is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC 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 CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of Alphabet i.e., Alphabet and CMC Investment go up and down completely randomly.

Pair Corralation between Alphabet and CMC Investment

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.6 times more return on investment than CMC Investment. However, Alphabet Inc Class C is 1.68 times less risky than CMC Investment. It trades about 0.24 of its potential returns per unit of risk. CMC Investment JSC is currently generating about -0.08 per unit of risk. If you would invest  17,411  in Alphabet Inc Class C on October 6, 2024 and sell it today you would earn a total of  1,902  from holding Alphabet Inc Class C or generate 10.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  CMC Investment JSC

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.

CMC Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alphabet and CMC Investment

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

The idea behind Alphabet Inc Class C and CMC Investment JSC 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.