Correlation Between Alphabet and Donegal Group

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

Diversification Opportunities for Alphabet and Donegal Group

-0.57

Correlation Coefficient

Alphabet  Donegal Group

Excellent diversification

The 3 months correlation between Alphabet and Donegal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B 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 Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of Alphabet i.e., Alphabet and Donegal Group go up and down completely randomly.

Pair Corralation between Alphabet and Donegal Group

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Donegal Group. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.94 times less risky than Donegal Group. The stock trades about -0.16 of its potential returns per unit of risk. The Donegal Group B is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,477  in Donegal Group B on December 30, 2024 and sell it today you would earn a total of  178.00  from holding Donegal Group B or generate 12.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.65%
Values	Daily Returns

Alphabet Inc Class C  vs.  Donegal Group B

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.

Donegal Group B

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Donegal Group

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

The idea behind Alphabet Inc Class C and Donegal Group B 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.