Correlation Between Alphabet and COFI

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

Diversification Opportunities for Alphabet and COFI

0.81

Correlation Coefficient

Alphabet  COFI

Very poor diversification

The 3 months correlation between Alphabet and COFI is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and COFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFI 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 COFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFI has no effect on the direction of Alphabet i.e., Alphabet and COFI go up and down completely randomly.

Pair Corralation between Alphabet and COFI

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the COFI. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 6.38 times less risky than COFI. The stock trades about -0.16 of its potential returns per unit of risk. The COFI is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  0.04  in COFI on December 30, 2024 and sell it today you would lose (0.02) from holding COFI or give up 43.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.38%
Values	Daily Returns

Alphabet Inc Class C  vs.  COFI

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 conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

COFI

Risk-Adjusted Performance

Very Weak

Over the last 90 days COFI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for COFI shareholders.

Pair Trading with Alphabet and COFI

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

The idea behind Alphabet Inc Class C and COFI 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.