Correlation Between Alphabet and EFU General

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

Diversification Opportunities for Alphabet and EFU General

-0.83

Correlation Coefficient

Alphabet  EFU General

Pay attention - limited upside

The 3 months correlation between Alphabet and EFU is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General Insurance 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 EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of Alphabet i.e., Alphabet and EFU General go up and down completely randomly.

Pair Corralation between Alphabet and EFU General

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the EFU General. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.3 times less risky than EFU General. The stock trades about -0.12 of its potential returns per unit of risk. The EFU General Insurance is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,419  in EFU General Insurance on December 29, 2024 and sell it today you would earn a total of  1,070  from holding EFU General Insurance or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Alphabet Inc Class C  vs.  EFU General Insurance

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.

EFU General Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EFU General may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alphabet and EFU General

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

The idea behind Alphabet Inc Class C and EFU General Insurance 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..