Correlation Between Alphabet and United Overseas

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

Diversification Opportunities for Alphabet and United Overseas

0.72

Correlation Coefficient

Alphabet  United Overseas

Poor diversification

The 3 months correlation between Alphabet and United is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank 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 United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of Alphabet i.e., Alphabet and United Overseas go up and down completely randomly.

Pair Corralation between Alphabet and United Overseas

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 2.07 times more return on investment than United Overseas. However, Alphabet is 2.07 times more volatile than United Overseas Bank. It trades about 0.12 of its potential returns per unit of risk. United Overseas Bank is currently generating about 0.09 per unit of risk. If you would invest  18,653  in Alphabet Inc Class C on October 11, 2024 and sell it today you would earn a total of  886.00  from holding Alphabet Inc Class C or generate 4.75% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  United Overseas Bank

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.

United Overseas Bank

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, United Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and United Overseas

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

The idea behind Alphabet Inc Class C and United Overseas Bank 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.