Correlation Between Alphabet and Canntab Therapeutics

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

Diversification Opportunities for Alphabet and Canntab Therapeutics

0.0

Correlation Coefficient

Alphabet  Canntab Therapeutics

Pay attention - limited upside

The 3 months correlation between Alphabet and Canntab is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Canntab Therapeutics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canntab Therapeutics 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 Canntab Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canntab Therapeutics has no effect on the direction of Alphabet i.e., Alphabet and Canntab Therapeutics go up and down completely randomly.

Pair Corralation between Alphabet and Canntab Therapeutics

Given the investment horizon of 90 days Alphabet is expected to generate 8.03 times less return on investment than Canntab Therapeutics. But when comparing it to its historical volatility, Alphabet Inc Class C is 15.51 times less risky than Canntab Therapeutics. It trades about 0.1 of its potential returns per unit of risk. Canntab Therapeutics Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.30  in Canntab Therapeutics Limited on September 14, 2024 and sell it today you would lose (1.29) from holding Canntab Therapeutics Limited or give up 99.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Canntab Therapeutics Limited

Alphabet Class C

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Canntab Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canntab Therapeutics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Canntab Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and Canntab Therapeutics

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

The idea behind Alphabet Inc Class C and Canntab Therapeutics Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.