Correlation Between Alphabet and Mitra Energi

Can any of the company-specific risk be diversified away by investing in both Alphabet and Mitra Energi 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 Mitra Energi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class A and Mitra Energi Persada, you can compare the effects of market volatilities on Alphabet and Mitra Energi 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 Mitra Energi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Mitra Energi.

Diversification Opportunities for Alphabet and Mitra Energi

0.35

Correlation Coefficient

Alphabet  Mitra Energi

Weak diversification

The 3 months correlation between Alphabet and Mitra is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Mitra Energi Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitra Energi Persada 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 A are associated (or correlated) with Mitra Energi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitra Energi Persada has no effect on the direction of Alphabet i.e., Alphabet and Mitra Energi go up and down completely randomly.

Pair Corralation between Alphabet and Mitra Energi

Assuming the 90 days trading horizon Alphabet Inc Class A is expected to generate 1.46 times more return on investment than Mitra Energi. However, Alphabet is 1.46 times more volatile than Mitra Energi Persada. It trades about 0.28 of its potential returns per unit of risk. Mitra Energi Persada is currently generating about -0.48 per unit of risk. If you would invest  354,500  in Alphabet Inc Class A on October 9, 2024 and sell it today you would earn a total of  42,499  from holding Alphabet Inc Class A or generate 11.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Alphabet Inc Class A  vs.  Mitra Energi Persada

Alphabet Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Alphabet displayed solid returns over the last few months and may actually be approaching a breakup point.

Mitra Energi Persada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitra Energi Persada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mitra Energi is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alphabet and Mitra Energi

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

The idea behind Alphabet Inc Class A and Mitra Energi Persada 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.