Correlation Between Alphabet and Living Cell

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

Diversification Opportunities for Alphabet and Living Cell

-0.47

Correlation Coefficient

Alphabet  Living Cell

Very good diversification

The 3 months correlation between Alphabet and Living is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Living Cell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Living Cell Technologies 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 Living Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Living Cell Technologies has no effect on the direction of Alphabet i.e., Alphabet and Living Cell go up and down completely randomly.

Pair Corralation between Alphabet and Living Cell

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Living Cell. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 30.99 times less risky than Living Cell. The stock trades about -0.37 of its potential returns per unit of risk. The Living Cell Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.25  in Living Cell Technologies on December 1, 2024 and sell it today you would earn a total of  0.38  from holding Living Cell Technologies or generate 152.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Alphabet Inc Class C  vs.  Living Cell Technologies

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 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.

Living Cell Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Living Cell Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Living Cell reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Living Cell

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

The idea behind Alphabet Inc Class C and Living Cell Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.