Correlation Between Alphabet and Naturgy Energy

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

Diversification Opportunities for Alphabet and Naturgy Energy

-0.81

Correlation Coefficient

Alphabet  Naturgy Energy

Pay attention - limited upside

The 3 months correlation between Alphabet and Naturgy is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Naturgy Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy Energy Group 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 Naturgy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy Energy Group has no effect on the direction of Alphabet i.e., Alphabet and Naturgy Energy go up and down completely randomly.

Pair Corralation between Alphabet and Naturgy Energy

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Naturgy Energy. In addition to that, Alphabet is 1.71 times more volatile than Naturgy Energy Group. It trades about -0.16 of its total potential returns per unit of risk. Naturgy Energy Group is currently generating about 0.13 per unit of volatility. If you would invest  2,336  in Naturgy Energy Group on December 30, 2024 and sell it today you would earn a total of  242.00  from holding Naturgy Energy Group or generate 10.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Alphabet Inc Class C  vs.  Naturgy Energy Group

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

Naturgy Energy Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naturgy Energy Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Naturgy Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alphabet and Naturgy Energy

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

The idea behind Alphabet Inc Class C and Naturgy Energy Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.