Correlation Between Alphabet and H Lundbeck

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

Diversification Opportunities for Alphabet and H Lundbeck

-0.77

Correlation Coefficient

Alphabet  H Lundbeck

Pay attention - limited upside

The 3 months correlation between Alphabet and HLUN-A is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and H Lundbeck AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H Lundbeck AS 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 H Lundbeck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H Lundbeck AS has no effect on the direction of Alphabet i.e., Alphabet and H Lundbeck go up and down completely randomly.

Pair Corralation between Alphabet and H Lundbeck

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.1 times more return on investment than H Lundbeck. However, Alphabet is 1.1 times more volatile than H Lundbeck AS. It trades about 0.1 of its potential returns per unit of risk. H Lundbeck AS is currently generating about 0.06 per unit of risk. If you would invest  8,949  in Alphabet Inc Class C on September 13, 2024 and sell it today you would earn a total of  10,722  from holding Alphabet Inc Class C or generate 119.81% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  H Lundbeck AS

Alphabet Class C

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 17 (%) 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.

H Lundbeck AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H Lundbeck AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alphabet and H Lundbeck

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

The idea behind Alphabet Inc Class C and H Lundbeck AS 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.