Correlation Between Alphabet and Niagara Mohawk
Can any of the company-specific risk be diversified away by investing in both Alphabet and Niagara Mohawk 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 Niagara Mohawk 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 Niagara Mohawk Power, you can compare the effects of market volatilities on Alphabet and Niagara Mohawk 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 Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Niagara Mohawk.
Diversification Opportunities for Alphabet and Niagara Mohawk
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alphabet and Niagara is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Alphabet i.e., Alphabet and Niagara Mohawk go up and down completely randomly.
Pair Corralation between Alphabet and Niagara Mohawk
Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Niagara Mohawk. In addition to that, Alphabet is 1.21 times more volatile than Niagara Mohawk Power. It trades about -0.01 of its total potential returns per unit of risk. Niagara Mohawk Power is currently generating about 0.08 per unit of volatility. If you would invest 5,542 in Niagara Mohawk Power on September 3, 2024 and sell it today you would earn a total of 658.00 from holding Niagara Mohawk Power or generate 11.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.6% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Niagara Mohawk Power
Performance |
| Timeline |
| Alphabet Class C |
| Niagara Mohawk Power |
Alphabet and Niagara Mohawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Niagara Mohawk
The main advantage of trading using opposite Alphabet and Niagara Mohawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Niagara Mohawk 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 Niagara Mohawk will offset losses from the drop in Niagara Mohawk's long position.The idea behind Alphabet Inc Class C and Niagara Mohawk Power 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.| Niagara Mohawk vs. Apple Inc | Niagara Mohawk vs. Microsoft | Niagara Mohawk vs. Amazon Inc | Niagara Mohawk vs. Alphabet Inc Class C |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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