Correlation Between Alphabet and Aterian
Can any of the company-specific risk be diversified away by investing in both Alphabet and Aterian 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 Aterian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Aterian, you can compare the effects of market volatilities on Alphabet and Aterian 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 Aterian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Aterian.
Diversification Opportunities for Alphabet and Aterian
Excellent diversification
The 3 months correlation between Alphabet and Aterian is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Aterian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aterian 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 C are associated (or correlated) with Aterian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aterian has no effect on the direction of Alphabet i.e., Alphabet and Aterian go up and down completely randomly.
Pair Corralation between Alphabet and Aterian
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Aterian. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.89 times less risky than Aterian. The stock trades about -0.07 of its potential returns per unit of risk. The Aterian is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 279.00 in Aterian on August 31, 2024 and sell it today you would lose (9.00) from holding Aterian or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Aterian
Performance |
| Timeline |
| Alphabet Class C |
| Aterian |
Alphabet and Aterian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Aterian
The main advantage of trading using opposite Alphabet and Aterian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Aterian 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 Aterian will offset losses from the drop in Aterian's long position.The idea behind Alphabet Inc Class C and Aterian 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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