Correlation Between Alphabet and Jacob Micro

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

Diversification Opportunities for Alphabet and Jacob Micro

0.71

Correlation Coefficient

Alphabet  Jacob Micro

Poor diversification

The 3 months correlation between Alphabet and Jacob is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Jacob Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacob Micro Cap 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 Jacob Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacob Micro Cap has no effect on the direction of Alphabet i.e., Alphabet and Jacob Micro go up and down completely randomly.

Pair Corralation between Alphabet and Jacob Micro

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.86 times more return on investment than Jacob Micro. However, Alphabet is 1.86 times more volatile than Jacob Micro Cap. It trades about 0.22 of its potential returns per unit of risk. Jacob Micro Cap is currently generating about 0.32 per unit of risk. If you would invest  17,369  in Alphabet Inc Class C on September 16, 2024 and sell it today you would earn a total of  1,769  from holding Alphabet Inc Class C or generate 10.18% 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.  Jacob Micro Cap

Alphabet Class C

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Jacob Micro Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jacob Micro Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Jacob Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alphabet and Jacob Micro

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

The idea behind Alphabet Inc Class C and Jacob Micro Cap 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.