Correlation Between Alphabet and Core Lithium

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

Diversification Opportunities for Alphabet and Core Lithium

-0.4

Correlation Coefficient

Alphabet  Core Lithium

Very good diversification

The 3 months correlation between Alphabet and Core is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium 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 Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of Alphabet i.e., Alphabet and Core Lithium go up and down completely randomly.

Pair Corralation between Alphabet and Core Lithium

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.32 times more return on investment than Core Lithium. However, Alphabet Inc Class C is 3.16 times less risky than Core Lithium. It trades about 0.09 of its potential returns per unit of risk. Core Lithium is currently generating about -0.03 per unit of risk. If you would invest  15,738  in Alphabet Inc Class C on September 18, 2024 and sell it today you would earn a total of  4,078  from holding Alphabet Inc Class C or generate 25.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.22%
Values	Daily Returns

Alphabet Inc Class C  vs.  Core Lithium

Alphabet Class C

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 15 (%) 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.

Core Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Alphabet and Core Lithium

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

The idea behind Alphabet Inc Class C and Core Lithium 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.