Correlation Between Alphabet and Eastern Commercial

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

Diversification Opportunities for Alphabet and Eastern Commercial

-0.61

Correlation Coefficient

Alphabet  Eastern Commercial

Excellent diversification

The 3 months correlation between Alphabet and Eastern is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Eastern Commercial Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Commercial 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 Eastern Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Commercial has no effect on the direction of Alphabet i.e., Alphabet and Eastern Commercial go up and down completely randomly.

Pair Corralation between Alphabet and Eastern Commercial

Given the investment horizon of 90 days Alphabet is expected to generate 14.58 times less return on investment than Eastern Commercial. But when comparing it to its historical volatility, Alphabet Inc Class C is 26.95 times less risky than Eastern Commercial. It trades about 0.07 of its potential returns per unit of risk. Eastern Commercial Leasing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Eastern Commercial Leasing on November 27, 2024 and sell it today you would lose (73.00) from holding Eastern Commercial Leasing or give up 45.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.24%
Values	Daily Returns

Alphabet Inc Class C  vs.  Eastern Commercial Leasing

Alphabet Class C

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Eastern Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Commercial Leasing 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 essential indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Alphabet and Eastern Commercial

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

The idea behind Alphabet Inc Class C and Eastern Commercial Leasing 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.