Correlation Between Alphabet and Interactive Brokers

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

Diversification Opportunities for Alphabet and Interactive Brokers

0.14

Correlation Coefficient

Alphabet  Interactive Brokers

Average diversification

The 3 months correlation between Alphabet and Interactive is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Interactive Brokers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Brokers 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 Interactive Brokers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Brokers has no effect on the direction of Alphabet i.e., Alphabet and Interactive Brokers go up and down completely randomly.

Pair Corralation between Alphabet and Interactive Brokers

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Interactive Brokers. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.34 times less risky than Interactive Brokers. The stock trades about -0.2 of its potential returns per unit of risk. The Interactive Brokers Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  20,387  in Interactive Brokers Group on November 28, 2024 and sell it today you would earn a total of  279.00  from holding Interactive Brokers Group or generate 1.37% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Interactive Brokers Group

Alphabet Class C

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Interactive Brokers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Interactive Brokers may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Alphabet and Interactive Brokers

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

The idea behind Alphabet Inc Class C and Interactive Brokers Group 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.