Correlation Between Alphabet and FG Annuities
Can any of the company-specific risk be diversified away by investing in both Alphabet and FG Annuities 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 FG Annuities 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 FG Annuities Life, you can compare the effects of market volatilities on Alphabet and FG Annuities 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 FG Annuities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and FG Annuities.
Diversification Opportunities for Alphabet and FG Annuities
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alphabet and FG Annuities is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and FG Annuities Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Annuities Life 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 FG Annuities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Annuities Life has no effect on the direction of Alphabet i.e., Alphabet and FG Annuities go up and down completely randomly.
Pair Corralation between Alphabet and FG Annuities
Given the investment horizon of 90 days Alphabet is expected to generate 1.79 times less return on investment than FG Annuities. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.57 times less risky than FG Annuities. It trades about 0.07 of its potential returns per unit of risk. FG Annuities Life is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,817 in FG Annuities Life on August 28, 2024 and sell it today you would earn a total of 3,026 from holding FG Annuities Life or generate 166.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet Inc Class C vs. FG Annuities Life
Performance |
| Timeline |
| Alphabet Class C |
| FG Annuities Life |
Alphabet and FG Annuities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and FG Annuities
The main advantage of trading using opposite Alphabet and FG Annuities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, FG Annuities 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 FG Annuities will offset losses from the drop in FG Annuities' long position.The idea behind Alphabet Inc Class C and FG Annuities Life 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.| FG Annuities vs. Morningstar Unconstrained Allocation | FG Annuities vs. Via Renewables | FG Annuities vs. Sitka Gold Corp | FG Annuities vs. MSCI ACWI exAUCONSUMER |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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