Correlation Between Alphabet and Guangzhou Automobile
Can any of the company-specific risk be diversified away by investing in both Alphabet and Guangzhou Automobile 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 Guangzhou Automobile 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 Guangzhou Automobile Group, you can compare the effects of market volatilities on Alphabet and Guangzhou Automobile 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 Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Guangzhou Automobile.
Diversification Opportunities for Alphabet and Guangzhou Automobile
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alphabet and Guangzhou is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile 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 Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Alphabet i.e., Alphabet and Guangzhou Automobile go up and down completely randomly.
Pair Corralation between Alphabet and Guangzhou Automobile
Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.27 times more return on investment than Guangzhou Automobile. However, Alphabet Inc Class C is 3.67 times less risky than Guangzhou Automobile. It trades about 0.09 of its potential returns per unit of risk. Guangzhou Automobile Group is currently generating about 0.02 per unit of risk. If you would invest 9,172 in Alphabet Inc Class C on November 9, 2024 and sell it today you would earn a total of 10,159 from holding Alphabet Inc Class C or generate 110.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 65.92% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Guangzhou Automobile Group
Performance |
| Timeline |
| Alphabet Class C |
| Guangzhou Automobile |
Alphabet and Guangzhou Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Guangzhou Automobile
The main advantage of trading using opposite Alphabet and Guangzhou Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Guangzhou Automobile 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 Guangzhou Automobile will offset losses from the drop in Guangzhou Automobile's long position.The idea behind Alphabet Inc Class C and Guangzhou Automobile 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.| Guangzhou Automobile vs. Great Wall Motor | Guangzhou Automobile vs. Dongfeng Group | Guangzhou Automobile vs. Great Wall Motor | Guangzhou Automobile vs. BAIC Motor |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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