Correlation Between Alphabet and STRYKER

Can any of the company-specific risk be diversified away by investing in both Alphabet and STRYKER 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 STRYKER 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 STRYKER P 3375, you can compare the effects of market volatilities on Alphabet and STRYKER 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 STRYKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and STRYKER.

Diversification Opportunities for Alphabet and STRYKER

-0.47

Correlation Coefficient

Alphabet  STRYKER

Very good diversification

The 3 months correlation between Alphabet and STRYKER is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and STRYKER P 3375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRYKER P 3375 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 STRYKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRYKER P 3375 has no effect on the direction of Alphabet i.e., Alphabet and STRYKER go up and down completely randomly.

Pair Corralation between Alphabet and STRYKER

Assuming the 90 days horizon Alphabet Inc Class A is expected to generate 5.45 times more return on investment than STRYKER. However, Alphabet is 5.45 times more volatile than STRYKER P 3375. It trades about 0.08 of its potential returns per unit of risk. STRYKER P 3375 is currently generating about -0.01 per unit of risk. If you would invest  16,911  in Alphabet Inc Class A on October 26, 2024 and sell it today you would earn a total of  2,887  from holding Alphabet Inc Class A or generate 17.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Alphabet Inc Class A  vs.  STRYKER P 3375

Alphabet Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 12 (%) 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.

STRYKER P 3375

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRYKER P 3375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, STRYKER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and STRYKER

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

The idea behind Alphabet Inc Class A and STRYKER P 3375 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.