Correlation Between Alphabet and GENERAL

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

Diversification Opportunities for Alphabet and GENERAL

-0.28

Correlation Coefficient

Alphabet  GENERAL

Very good diversification

The 3 months correlation between Alphabet and GENERAL is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Alphabet i.e., Alphabet and GENERAL go up and down completely randomly.

Pair Corralation between Alphabet and GENERAL

Assuming the 90 days horizon Alphabet Inc Class A is expected to under-perform the GENERAL. In addition to that, Alphabet is 3.18 times more volatile than GENERAL ELEC CAP. It trades about -0.12 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.03 per unit of volatility. If you would invest  10,332  in GENERAL ELEC CAP on December 25, 2024 and sell it today you would earn a total of  118.00  from holding GENERAL ELEC CAP or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Alphabet Inc Class A  vs.  GENERAL ELEC CAP

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and GENERAL

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

The idea behind Alphabet Inc Class A and GENERAL ELEC CAP 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.