Correlation Between Alphabet and SANUWAVE Health

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

Diversification Opportunities for Alphabet and SANUWAVE Health

0.74

Correlation Coefficient

Alphabet  SANUWAVE Health

Poor diversification

The 3 months correlation between Alphabet and SANUWAVE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health 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 SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of Alphabet i.e., Alphabet and SANUWAVE Health go up and down completely randomly.

Pair Corralation between Alphabet and SANUWAVE Health

Given the investment horizon of 90 days Alphabet is expected to generate 90.15 times less return on investment than SANUWAVE Health. But when comparing it to its historical volatility, Alphabet Inc Class C is 69.3 times less risky than SANUWAVE Health. It trades about 0.09 of its potential returns per unit of risk. SANUWAVE Health is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,500  in SANUWAVE Health on October 7, 2024 and sell it today you would earn a total of  701.00  from holding SANUWAVE Health or generate 46.73% 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.  SANUWAVE Health

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.

SANUWAVE Health

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and SANUWAVE Health

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

The idea behind Alphabet Inc Class C and SANUWAVE Health 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 Commodity Directory module to find actively traded commodities issued by global exchanges.