Correlation Between Alphabet and TIMES CHINA

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

Diversification Opportunities for Alphabet and TIMES CHINA

-0.23

Correlation Coefficient

Alphabet  TIMES CHINA

Very good diversification

The 3 months correlation between Alphabet and TIMES is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and TIMES CHINA HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIMES CHINA HLDGS 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 TIMES CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIMES CHINA HLDGS has no effect on the direction of Alphabet i.e., Alphabet and TIMES CHINA go up and down completely randomly.

Pair Corralation between Alphabet and TIMES CHINA

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.32 times more return on investment than TIMES CHINA. However, Alphabet Inc Class C is 3.13 times less risky than TIMES CHINA. It trades about -0.01 of its potential returns per unit of risk. TIMES CHINA HLDGS is currently generating about -0.04 per unit of risk. If you would invest  19,671  in Alphabet Inc Class C on October 12, 2024 and sell it today you would lose (132.00) from holding Alphabet Inc Class C or give up 0.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  TIMES CHINA HLDGS

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.

TIMES CHINA HLDGS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TIMES CHINA HLDGS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TIMES CHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and TIMES CHINA

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

The idea behind Alphabet Inc Class C and TIMES CHINA HLDGS 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.