Correlation Between Alphabet and ProShares Online

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

Diversification Opportunities for Alphabet and ProShares Online

0.48

Correlation Coefficient

Alphabet  ProShares Online

Very weak diversification

The 3 months correlation between Alphabet and ProShares is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and ProShares Online Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Online Retail 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 ProShares Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Online Retail has no effect on the direction of Alphabet i.e., Alphabet and ProShares Online go up and down completely randomly.

Pair Corralation between Alphabet and ProShares Online

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.5 times more return on investment than ProShares Online. However, Alphabet is 1.5 times more volatile than ProShares Online Retail. It trades about 0.16 of its potential returns per unit of risk. ProShares Online Retail is currently generating about 0.06 per unit of risk. If you would invest  16,561  in Alphabet Inc Class C on October 20, 2024 and sell it today you would earn a total of  3,194  from holding Alphabet Inc Class C or generate 19.29% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  ProShares Online Retail

Alphabet Class C

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

ProShares Online Retail

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Online Retail are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, ProShares Online is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and ProShares Online

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

The idea behind Alphabet Inc Class C and ProShares Online Retail 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.