Correlation Between Alphabet and Techgen Metals

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

Diversification Opportunities for Alphabet and Techgen Metals

-0.39

Correlation Coefficient

Alphabet  Techgen Metals

Very good diversification

The 3 months correlation between Alphabet and Techgen is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Techgen Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techgen Metals 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 Techgen Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techgen Metals has no effect on the direction of Alphabet i.e., Alphabet and Techgen Metals go up and down completely randomly.

Pair Corralation between Alphabet and Techgen Metals

Given the investment horizon of 90 days Alphabet is expected to generate 1.41 times less return on investment than Techgen Metals. But when comparing it to its historical volatility, Alphabet Inc Class C is 2.92 times less risky than Techgen Metals. It trades about 0.26 of its potential returns per unit of risk. Techgen Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.80  in Techgen Metals on September 18, 2024 and sell it today you would earn a total of  0.40  from holding Techgen Metals or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Alphabet Inc Class C  vs.  Techgen Metals

Alphabet Class C

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Techgen Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Techgen Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Techgen Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alphabet and Techgen Metals

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

The idea behind Alphabet Inc Class C and Techgen Metals 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.