Correlation Between Alphabet and Chicago Atlantic

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

Diversification Opportunities for Alphabet and Chicago Atlantic

0.58

Correlation Coefficient

Alphabet  Chicago Atlantic

Very weak diversification

The 3 months correlation between Alphabet and Chicago is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Chicago Atlantic Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicago Atlantic Real 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 Chicago Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicago Atlantic Real has no effect on the direction of Alphabet i.e., Alphabet and Chicago Atlantic go up and down completely randomly.

Pair Corralation between Alphabet and Chicago Atlantic

Assuming the 90 days horizon Alphabet Inc Class A is expected to generate 2.41 times more return on investment than Chicago Atlantic. However, Alphabet is 2.41 times more volatile than Chicago Atlantic Real. It trades about 0.18 of its potential returns per unit of risk. Chicago Atlantic Real is currently generating about 0.09 per unit of risk. If you would invest  16,167  in Alphabet Inc Class A on October 9, 2024 and sell it today you would earn a total of  3,520  from holding Alphabet Inc Class A or generate 21.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class A  vs.  Chicago Atlantic Real

Alphabet Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Alphabet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Chicago Atlantic Real

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic Real are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Chicago Atlantic is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alphabet and Chicago Atlantic

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

The idea behind Alphabet Inc Class A and Chicago Atlantic Real 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.