Correlation Between Alphabet and Baytex Energy

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

Diversification Opportunities for Alphabet and Baytex Energy

AlphabetBaytexDiversified AwayAlphabetBaytexDiversified Away100%
-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alphabet and Baytex is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Baytex Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baytex Energy Corp 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 Baytex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baytex Energy Corp has no effect on the direction of Alphabet i.e., Alphabet and Baytex Energy go up and down completely randomly.

Pair Corralation between Alphabet and Baytex Energy

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Baytex Energy. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.21 times less risky than Baytex Energy. The stock trades about -0.21 of its potential returns per unit of risk. The Baytex Energy Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  365.00  in Baytex Energy Corp on November 25, 2024 and sell it today you would lose (20.00) from holding Baytex Energy Corp or give up 5.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alphabet Inc Class C  vs.  Baytex Energy Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-10010
JavaScript chart by amCharts 3.21.15GOOG BTE
       Timeline  
Alphabet Class C 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb165170175180185190195200205
Baytex Energy Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Baytex Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.23.33.43.53.63.73.83.94

Alphabet and Baytex Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.54-4.9-3.26-1.61-0.02741.583.254.916.588.24 0.020.040.060.08
JavaScript chart by amCharts 3.21.15GOOG BTE
       Returns  

Pair Trading with Alphabet and Baytex Energy

The main advantage of trading using opposite Alphabet and Baytex Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Baytex Energy 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 Baytex Energy will offset losses from the drop in Baytex Energy's long position.
The idea behind Alphabet Inc Class C and Baytex Energy Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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