Correlation Between Alphabet and TrueCar

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

Diversification Opportunities for Alphabet and TrueCar

0.94

Correlation Coefficient

Alphabet  TrueCar

Almost no diversification

The 3 months correlation between Alphabet and TrueCar is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and TrueCar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueCar 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 TrueCar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueCar has no effect on the direction of Alphabet i.e., Alphabet and TrueCar go up and down completely randomly.

Pair Corralation between Alphabet and TrueCar

Assuming the 90 days horizon Alphabet Inc Class A is expected to generate 0.52 times more return on investment than TrueCar. However, Alphabet Inc Class A is 1.94 times less risky than TrueCar. It trades about -0.16 of its potential returns per unit of risk. TrueCar is currently generating about -0.33 per unit of risk. If you would invest  19,102  in Alphabet Inc Class A on December 29, 2024 and sell it today you would lose (3,669) from holding Alphabet Inc Class A or give up 19.21% of portfolio value over 90 days.

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

Alphabet Inc Class A  vs.  TrueCar

Alphabet Class A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

TrueCar

Risk-Adjusted Performance

Very Weak

Over the last 90 days TrueCar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Alphabet and TrueCar

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

The idea behind Alphabet Inc Class A and TrueCar 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.