Correlation Between Alphabet and Lexington Realty

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

Diversification Opportunities for Alphabet and Lexington Realty

-0.35

Correlation Coefficient

Alphabet  Lexington Realty

Very good diversification

The 3 months correlation between Alphabet and Lexington is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Lexington Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexington Realty Trust 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 Lexington Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexington Realty Trust has no effect on the direction of Alphabet i.e., Alphabet and Lexington Realty go up and down completely randomly.

Pair Corralation between Alphabet and Lexington Realty

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Lexington Realty. In addition to that, Alphabet is 2.75 times more volatile than Lexington Realty Trust. It trades about -0.15 of its total potential returns per unit of risk. Lexington Realty Trust is currently generating about -0.06 per unit of volatility. If you would invest  4,792  in Lexington Realty Trust on December 31, 2024 and sell it today you would lose (146.00) from holding Lexington Realty Trust or give up 3.05% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  Lexington Realty Trust

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 May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lexington Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lexington Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lexington Realty is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alphabet and Lexington Realty

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

The idea behind Alphabet Inc Class C and Lexington Realty Trust 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .