Correlation Between Alphabet and Quad Graphics

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

Diversification Opportunities for Alphabet and Quad Graphics

0.73

Correlation Coefficient

Alphabet  Quad Graphics

Poor diversification

The 3 months correlation between Alphabet and Quad is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Quad Graphics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quad Graphics 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 Quad Graphics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quad Graphics has no effect on the direction of Alphabet i.e., Alphabet and Quad Graphics go up and down completely randomly.

Pair Corralation between Alphabet and Quad Graphics

Given the investment horizon of 90 days Alphabet is expected to generate 1.23 times less return on investment than Quad Graphics. But when comparing it to its historical volatility, Alphabet Inc Class C is 2.14 times less risky than Quad Graphics. It trades about 0.09 of its potential returns per unit of risk. Quad Graphics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  487.00  in Quad Graphics on October 5, 2024 and sell it today you would earn a total of  172.00  from holding Quad Graphics or generate 35.32% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Quad Graphics

Alphabet Class C

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 11 (%) 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.

Quad Graphics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quad Graphics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Quad Graphics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Quad Graphics

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

The idea behind Alphabet Inc Class C and Quad Graphics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.