Correlation Between Alphabet and Media

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

Diversification Opportunities for Alphabet and Media

-0.64

Correlation Coefficient

Alphabet  Media

Excellent diversification

The 3 months correlation between Alphabet and Media is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Media and Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media and Games 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 Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media and Games has no effect on the direction of Alphabet i.e., Alphabet and Media go up and down completely randomly.

Pair Corralation between Alphabet and Media

Given the investment horizon of 90 days Alphabet is expected to generate 9.82 times less return on investment than Media. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.83 times less risky than Media. It trades about 0.01 of its potential returns per unit of risk. Media and Games is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,075  in Media and Games on December 1, 2024 and sell it today you would earn a total of  210.00  from holding Media and Games or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Alphabet Inc Class C  vs.  Media and Games

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.

Media and Games

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alphabet and Media

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

The idea behind Alphabet Inc Class C and Media and Games 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.