Correlation Between Alphabet and ZKB Gold

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

Diversification Opportunities for Alphabet and ZKB Gold

0.5

Correlation Coefficient

Alphabet  ZKB Gold

Very weak diversification

The 3 months correlation between Alphabet and ZKB is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and ZKB Gold ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZKB Gold ETF 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 ZKB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZKB Gold ETF has no effect on the direction of Alphabet i.e., Alphabet and ZKB Gold go up and down completely randomly.

Pair Corralation between Alphabet and ZKB Gold

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.97 times more return on investment than ZKB Gold. However, Alphabet is 1.97 times more volatile than ZKB Gold ETF. It trades about 0.14 of its potential returns per unit of risk. ZKB Gold ETF is currently generating about 0.11 per unit of risk. If you would invest  16,700  in Alphabet Inc Class C on September 28, 2024 and sell it today you would earn a total of  2,712  from holding Alphabet Inc Class C or generate 16.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Alphabet Inc Class C  vs.  ZKB Gold ETF

Alphabet Class C

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 11 (%) 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.

ZKB Gold ETF

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZKB Gold ETF are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, ZKB Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alphabet and ZKB Gold

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

The idea behind Alphabet Inc Class C and ZKB Gold ETF 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.