Correlation Between Alphabet and Zota Health

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

Diversification Opportunities for Alphabet and Zota Health

0.61

Correlation Coefficient

Alphabet  Zota Health

Poor diversification

The 3 months correlation between Alphabet and Zota is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Zota Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zota Health Care 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 Zota Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zota Health Care has no effect on the direction of Alphabet i.e., Alphabet and Zota Health go up and down completely randomly.

Pair Corralation between Alphabet and Zota Health

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Zota Health. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.85 times less risky than Zota Health. The stock trades about 0.0 of its potential returns per unit of risk. The Zota Health Care is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  61,240  in Zota Health Care on December 4, 2024 and sell it today you would earn a total of  18,960  from holding Zota Health Care or generate 30.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Alphabet Inc Class C  vs.  Zota Health Care

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.

Zota Health Care

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zota Health Care are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Zota Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Zota Health

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

The idea behind Alphabet Inc Class C and Zota Health Care 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.