Correlation Between NEWMONT and Alphabet

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

By analyzing existing cross correlation between NEWMONT MNG P and Alphabet Inc Class A, you can compare the effects of market volatilities on NEWMONT and Alphabet 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 NEWMONT with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEWMONT and Alphabet.

Diversification Opportunities for NEWMONT and Alphabet

-0.59

Correlation Coefficient

NEWMONT  Alphabet

Excellent diversification

The 3 months correlation between NEWMONT and Alphabet is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NEWMONT MNG P and Alphabet Inc Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A and NEWMONT 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 NEWMONT MNG P are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of NEWMONT i.e., NEWMONT and Alphabet go up and down completely randomly.

Pair Corralation between NEWMONT and Alphabet

Assuming the 90 days trading horizon NEWMONT is expected to generate 3.86 times less return on investment than Alphabet. But when comparing it to its historical volatility, NEWMONT MNG P is 2.93 times less risky than Alphabet. It trades about 0.26 of its potential returns per unit of risk. Alphabet Inc Class A is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  16,457  in Alphabet Inc Class A on September 23, 2024 and sell it today you would earn a total of  2,684  from holding Alphabet Inc Class A or generate 16.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

NEWMONT MNG P  vs.  Alphabet Inc Class A

NEWMONT MNG P

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with NEWMONT and Alphabet

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

The idea behind NEWMONT MNG P and Alphabet Inc Class A 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 Global Correlations module to find global opportunities by holding instruments from different markets.