Correlation Between Alphabet and US FOODS

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

Diversification Opportunities for Alphabet and US FOODS

0.66

Correlation Coefficient

Alphabet  US FOODS

Poor diversification

The 3 months correlation between Alphabet and UFH is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING 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 US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Alphabet i.e., Alphabet and US FOODS go up and down completely randomly.

Pair Corralation between Alphabet and US FOODS

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.87 times more return on investment than US FOODS. However, Alphabet is 1.87 times more volatile than US FOODS HOLDING. It trades about 0.34 of its potential returns per unit of risk. US FOODS HOLDING is currently generating about -0.09 per unit of risk. If you would invest  16,638  in Alphabet Inc Class C on September 23, 2024 and sell it today you would earn a total of  2,658  from holding Alphabet Inc Class C or generate 15.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Alphabet Inc Class C  vs.  US FOODS HOLDING

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 weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

US FOODS HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and US FOODS

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

The idea behind Alphabet Inc Class C and US FOODS HOLDING 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.