Correlation Between Alphabet and SPDR MSCI

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

Diversification Opportunities for Alphabet and SPDR MSCI

-0.38

Correlation Coefficient

Alphabet  SPDR MSCI

Very good diversification

The 3 months correlation between Alphabet and SPDR is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and SPDR MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Europe 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Europe has no effect on the direction of Alphabet i.e., Alphabet and SPDR MSCI go up and down completely randomly.

Pair Corralation between Alphabet and SPDR MSCI

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the SPDR MSCI. In addition to that, Alphabet is 3.12 times more volatile than SPDR MSCI Europe. It trades about -0.12 of its total potential returns per unit of risk. SPDR MSCI Europe is currently generating about 0.39 per unit of volatility. If you would invest  30,590  in SPDR MSCI Europe on December 1, 2024 and sell it today you would earn a total of  3,375  from holding SPDR MSCI Europe or generate 11.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.02%
Values	Daily Returns

Alphabet Inc Class C  vs.  SPDR MSCI Europe

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.

SPDR MSCI Europe

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Europe are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SPDR MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alphabet and SPDR MSCI

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

The idea behind Alphabet Inc Class C and SPDR MSCI Europe 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..