Correlation Between Alphabet and IShares Consumer

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

Diversification Opportunities for Alphabet and IShares Consumer

0.65

Correlation Coefficient

Alphabet  IShares Consumer

Poor diversification

The 3 months correlation between Alphabet and IShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and iShares Consumer Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Dis 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 IShares Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Dis has no effect on the direction of Alphabet i.e., Alphabet and IShares Consumer go up and down completely randomly.

Pair Corralation between Alphabet and IShares Consumer

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the IShares Consumer. In addition to that, Alphabet is 1.56 times more volatile than iShares Consumer Discretionary. It trades about -0.12 of its total potential returns per unit of risk. iShares Consumer Discretionary is currently generating about -0.12 per unit of volatility. If you would invest  9,662  in iShares Consumer Discretionary on December 29, 2024 and sell it today you would lose (858.00) from holding iShares Consumer Discretionary or give up 8.88% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  iShares Consumer Discretionary

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

iShares Consumer Dis

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Consumer Discretionary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Alphabet and IShares Consumer

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

The idea behind Alphabet Inc Class C and iShares Consumer Discretionary 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 Global Correlations module to find global opportunities by holding instruments from different markets.