Correlation Between Alphabet and CubicFarm Systems

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

Diversification Opportunities for Alphabet and CubicFarm Systems

-0.05

Correlation Coefficient

Alphabet  CubicFarm Systems

Good diversification

The 3 months correlation between Alphabet and CubicFarm is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and CubicFarm Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubicFarm Systems Corp 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 CubicFarm Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubicFarm Systems Corp has no effect on the direction of Alphabet i.e., Alphabet and CubicFarm Systems go up and down completely randomly.

Pair Corralation between Alphabet and CubicFarm Systems

Given the investment horizon of 90 days Alphabet is expected to generate 108.42 times less return on investment than CubicFarm Systems. But when comparing it to its historical volatility, Alphabet Inc Class C is 54.34 times less risky than CubicFarm Systems. It trades about 0.07 of its potential returns per unit of risk. CubicFarm Systems Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  33.00  in CubicFarm Systems Corp on December 5, 2024 and sell it today you would lose (8.00) from holding CubicFarm Systems Corp or give up 24.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.15%
Values	Daily Returns

Alphabet Inc Class C  vs.  CubicFarm Systems Corp

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.

CubicFarm Systems Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CubicFarm Systems Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, CubicFarm Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and CubicFarm Systems

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

The idea behind Alphabet Inc Class C and CubicFarm Systems Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.