Correlation Between Alphabet and Shengfeng Development

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

Diversification Opportunities for Alphabet and Shengfeng Development

0.33

Correlation Coefficient

Alphabet  Shengfeng Development

Weak diversification

The 3 months correlation between Alphabet and Shengfeng is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Shengfeng Development Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengfeng Development 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 Shengfeng Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengfeng Development has no effect on the direction of Alphabet i.e., Alphabet and Shengfeng Development go up and down completely randomly.

Pair Corralation between Alphabet and Shengfeng Development

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Shengfeng Development. In addition to that, Alphabet is 1.05 times more volatile than Shengfeng Development Limited. It trades about -0.16 of its total potential returns per unit of risk. Shengfeng Development Limited is currently generating about -0.02 per unit of volatility. If you would invest  102.00  in Shengfeng Development Limited on December 30, 2024 and sell it today you would lose (4.00) from holding Shengfeng Development Limited or give up 3.92% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  Shengfeng Development Limited

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.

Shengfeng Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shengfeng Development Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Shengfeng Development is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alphabet and Shengfeng Development

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

The idea behind Alphabet Inc Class C and Shengfeng Development Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.