Correlation Between Alphabet and GraniteShares FAANG

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

Diversification Opportunities for Alphabet and GraniteShares FAANG

0.88

Correlation Coefficient

Alphabet  GraniteShares FAANG

Very poor diversification

The 3 months correlation between Alphabet and GraniteShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and GraniteShares FAANG ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares FAANG ETC 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 GraniteShares FAANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares FAANG ETC has no effect on the direction of Alphabet i.e., Alphabet and GraniteShares FAANG go up and down completely randomly.

Pair Corralation between Alphabet and GraniteShares FAANG

Given the investment horizon of 90 days Alphabet is expected to generate 1.3 times less return on investment than GraniteShares FAANG. In addition to that, Alphabet is 1.32 times more volatile than GraniteShares FAANG ETC. It trades about 0.09 of its total potential returns per unit of risk. GraniteShares FAANG ETC is currently generating about 0.15 per unit of volatility. If you would invest  1,896  in GraniteShares FAANG ETC on October 4, 2024 and sell it today you would earn a total of  3,261  from holding GraniteShares FAANG ETC or generate 171.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Alphabet Inc Class C  vs.  GraniteShares FAANG ETC

Alphabet Class C

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

GraniteShares FAANG ETC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares FAANG ETC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GraniteShares FAANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and GraniteShares FAANG

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

The idea behind Alphabet Inc Class C and GraniteShares FAANG ETC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.