Correlation Between Alphabet and GBank Financial

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

Diversification Opportunities for Alphabet and GBank Financial

0.7

Correlation Coefficient

Alphabet  GBank Financial

Poor diversification

The 3 months correlation between Alphabet and GBank is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and GBank Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBank Financial Holdings 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 GBank Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBank Financial Holdings has no effect on the direction of Alphabet i.e., Alphabet and GBank Financial go up and down completely randomly.

Pair Corralation between Alphabet and GBank Financial

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.64 times more return on investment than GBank Financial. However, Alphabet is 1.64 times more volatile than GBank Financial Holdings. It trades about 0.33 of its potential returns per unit of risk. GBank Financial Holdings is currently generating about 0.19 per unit of risk. If you would invest  17,043  in Alphabet Inc Class C on September 27, 2024 and sell it today you would earn a total of  2,667  from holding Alphabet Inc Class C or generate 15.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Alphabet Inc Class C  vs.  GBank Financial Holdings

Alphabet Class C

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

GBank Financial Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GBank Financial Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, GBank Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and GBank Financial

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

The idea behind Alphabet Inc Class C and GBank Financial Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .