Correlation Between Alphabet and China Railway
Can any of the company-specific risk be diversified away by investing in both Alphabet and China Railway 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 China Railway 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 China Railway Group, you can compare the effects of market volatilities on Alphabet and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and China Railway.
Diversification Opportunities for Alphabet and China Railway
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alphabet and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of Alphabet i.e., Alphabet and China Railway go up and down completely randomly.
Pair Corralation between Alphabet and China Railway
Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.97 times more return on investment than China Railway. However, Alphabet Inc Class C is 1.03 times less risky than China Railway. It trades about -0.02 of its potential returns per unit of risk. China Railway Group is currently generating about -0.15 per unit of risk. If you would invest 17,265 in Alphabet Inc Class C on September 2, 2024 and sell it today you would lose (216.00) from holding Alphabet Inc Class C or give up 1.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Alphabet Inc Class C vs. China Railway Group
Performance |
| Timeline |
| Alphabet Class C |
| China Railway Group |
Alphabet and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and China Railway
The main advantage of trading using opposite Alphabet and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.The idea behind Alphabet Inc Class C and China Railway Group 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.| China Railway vs. Perdoceo Education | China Railway vs. Spirent Communications plc | China Railway vs. Consolidated Communications Holdings | China Railway vs. Sims Metal Management |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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