Correlation Between Alphabet and OCCIDENTAL

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

Diversification Opportunities for Alphabet and OCCIDENTAL

-0.49

Correlation Coefficient

Alphabet  OCCIDENTAL

Very good diversification

The 3 months correlation between Alphabet and OCCIDENTAL is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and OCCIDENTAL PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCCIDENTAL PETE P 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 OCCIDENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCCIDENTAL PETE P has no effect on the direction of Alphabet i.e., Alphabet and OCCIDENTAL go up and down completely randomly.

Pair Corralation between Alphabet and OCCIDENTAL

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 2.16 times more return on investment than OCCIDENTAL. However, Alphabet is 2.16 times more volatile than OCCIDENTAL PETE P. It trades about -0.02 of its potential returns per unit of risk. OCCIDENTAL PETE P is currently generating about -0.08 per unit of risk. If you would invest  17,589  in Alphabet Inc Class C on December 4, 2024 and sell it today you would lose (723.00) from holding Alphabet Inc Class C or give up 4.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	64.41%
Values	Daily Returns

Alphabet Inc Class C  vs.  OCCIDENTAL PETE P

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

OCCIDENTAL PETE P

Risk-Adjusted Performance

Very Weak

Over the last 90 days OCCIDENTAL PETE P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, OCCIDENTAL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and OCCIDENTAL

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

The idea behind Alphabet Inc Class C and OCCIDENTAL PETE P 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.