Correlation Between Alphabet and Graf Global

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

Diversification Opportunities for Alphabet and Graf Global

0.66

Correlation Coefficient

Alphabet  Graf Global

Poor diversification

The 3 months correlation between Alphabet and Graf is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Graf Global Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graf Global Corp 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 Graf Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graf Global Corp has no effect on the direction of Alphabet i.e., Alphabet and Graf Global go up and down completely randomly.

Pair Corralation between Alphabet and Graf Global

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 13.48 times more return on investment than Graf Global. However, Alphabet is 13.48 times more volatile than Graf Global Corp. It trades about 0.19 of its potential returns per unit of risk. Graf Global Corp is currently generating about 0.18 per unit of risk. If you would invest  17,660  in Alphabet Inc Class C on September 17, 2024 and sell it today you would earn a total of  1,478  from holding Alphabet Inc Class C or generate 8.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Graf Global Corp

Alphabet Class C

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 13 (%) 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.

Graf Global Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Graf Global Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graf Global 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 Graf Global

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

The idea behind Alphabet Inc Class C and Graf Global Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.