Correlation Between Alphabet and BT Group
Can any of the company-specific risk be diversified away by investing in both Alphabet and BT Group 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 BT Group 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 BT Group Plc, you can compare the effects of market volatilities on Alphabet and BT Group 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 BT Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and BT Group.
Diversification Opportunities for Alphabet and BT Group
Good diversification
The 3 months correlation between Alphabet and BT-A is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and BT Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BT Group Plc 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 BT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BT Group Plc has no effect on the direction of Alphabet i.e., Alphabet and BT Group go up and down completely randomly.
Pair Corralation between Alphabet and BT Group
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the BT Group. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.05 times less risky than BT Group. The stock trades about -0.02 of its potential returns per unit of risk. The BT Group Plc is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 13,825 in BT Group Plc on September 1, 2024 and sell it today you would earn a total of 2,105 from holding BT Group Plc or generate 15.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Alphabet Inc Class C vs. BT Group Plc
Performance |
| Timeline |
| Alphabet Class C |
| BT Group Plc |
Alphabet and BT Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and BT Group
The main advantage of trading using opposite Alphabet and BT Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, BT Group 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 BT Group will offset losses from the drop in BT Group's long position.The idea behind Alphabet Inc Class C and BT Group Plc 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.| BT Group vs. Bloomsbury Publishing Plc | BT Group vs. Bytes Technology | BT Group vs. Spotify Technology SA | BT Group vs. JB Hunt Transport |
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.
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