Correlation Between Alphabet and Lennox International

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

Diversification Opportunities for Alphabet and Lennox International

-0.34

Correlation Coefficient

Alphabet  Lennox International

Very good diversification

The 3 months correlation between Alphabet and Lennox is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International 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 Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of Alphabet i.e., Alphabet and Lennox International go up and down completely randomly.

Pair Corralation between Alphabet and Lennox International

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.05 times more return on investment than Lennox International. However, Alphabet is 1.05 times more volatile than Lennox International. It trades about 0.04 of its potential returns per unit of risk. Lennox International is currently generating about -0.05 per unit of risk. If you would invest  17,030  in Alphabet Inc Class C on November 28, 2024 and sell it today you would earn a total of  707.00  from holding Alphabet Inc Class C or generate 4.15% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Lennox International

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 3 (%) 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.

Lennox International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennox International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Alphabet and Lennox International

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

The idea behind Alphabet Inc Class C and Lennox International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.