Correlation Between Alphabet and Holcim
Can any of the company-specific risk be diversified away by investing in both Alphabet and Holcim 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 Holcim 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 Holcim, you can compare the effects of market volatilities on Alphabet and Holcim 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 Holcim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Holcim.
Diversification Opportunities for Alphabet and Holcim
Very weak diversification
The 3 months correlation between Alphabet and Holcim is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Holcim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim 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 Holcim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim has no effect on the direction of Alphabet i.e., Alphabet and Holcim go up and down completely randomly.
Pair Corralation between Alphabet and Holcim
Given the investment horizon of 90 days Alphabet is expected to generate 1.76 times less return on investment than Holcim. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.06 times less risky than Holcim. It trades about 0.06 of its potential returns per unit of risk. Holcim is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,199 in Holcim on September 2, 2024 and sell it today you would earn a total of 3,961 from holding Holcim or generate 63.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 83.06% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Holcim
Performance |
| Timeline |
| Alphabet Class C |
| Holcim |
Alphabet and Holcim Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Holcim
The main advantage of trading using opposite Alphabet and Holcim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Holcim 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 Holcim will offset losses from the drop in Holcim's long position.The idea behind Alphabet Inc Class C and Holcim 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.| Holcim vs. HeidelbergCement AG ADR | Holcim vs. Anhui Conch Cement | Holcim vs. Buzzi Unicem SpA | Holcim vs. Wienerberger Baustoffindustrie |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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