Correlation Between Alphabet and Digital Mediatama

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

Diversification Opportunities for Alphabet and Digital Mediatama

-0.3

Correlation Coefficient

Alphabet  Digital Mediatama

Very good diversification

The 3 months correlation between Alphabet and Digital is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Digital Mediatama Maxima in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Mediatama Maxima 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 Digital Mediatama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Mediatama Maxima has no effect on the direction of Alphabet i.e., Alphabet and Digital Mediatama go up and down completely randomly.

Pair Corralation between Alphabet and Digital Mediatama

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Digital Mediatama. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 3.25 times less risky than Digital Mediatama. The stock trades about -0.37 of its potential returns per unit of risk. The Digital Mediatama Maxima is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  22,800  in Digital Mediatama Maxima on December 1, 2024 and sell it today you would earn a total of  8,200  from holding Digital Mediatama Maxima or generate 35.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Alphabet Inc Class C  vs.  Digital Mediatama Maxima

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.

Digital Mediatama Maxima

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Mediatama Maxima are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Digital Mediatama disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Digital Mediatama

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

The idea behind Alphabet Inc Class C and Digital Mediatama Maxima 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 CEOs Directory module to screen CEOs from public companies around the world.