Correlation Between Alphabet and Stone Harbor

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

Diversification Opportunities for Alphabet and Stone Harbor

-0.42

Correlation Coefficient

Alphabet  Stone Harbor

Very good diversification

The 3 months correlation between Alphabet and Stone is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Stone Harbor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Harbor Emerging 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 Stone Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Harbor Emerging has no effect on the direction of Alphabet i.e., Alphabet and Stone Harbor go up and down completely randomly.

Pair Corralation between Alphabet and Stone Harbor

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.39 times more return on investment than Stone Harbor. However, Alphabet is 1.39 times more volatile than Stone Harbor Emerging. It trades about 0.09 of its potential returns per unit of risk. Stone Harbor Emerging is currently generating about -0.01 per unit of risk. If you would invest  15,840  in Alphabet Inc Class C on August 31, 2024 and sell it today you would earn a total of  1,242  from holding Alphabet Inc Class C or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Stone Harbor Emerging

Alphabet Class C

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 6 (%) 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 December 2024.

Stone Harbor Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Harbor Emerging has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Stone Harbor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and Stone Harbor

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

The idea behind Alphabet Inc Class C and Stone Harbor Emerging 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.