Correlation Between Facebook and Alphabet

By analyzing existing cross correlation between Facebook and Alphabet you can compare the effects of market volatilities on Facebook and Alphabet 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 Facebook with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Facebook and Alphabet.

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Can any of the company-specific risk be diversified away by investing in both Facebook and Alphabet at the same time? Although using correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combing Facebook and Alphabet into the same portfolio which is an essential part of fundamental portfolio management process.

Diversification Opportunities for Facebook and Alphabet

0.93
Correlation
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Almost no diversification

The 3 months correlation between Facebook and Alphabet is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Facebook Inc and Alphabet Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Alphabet and Facebook 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 Facebook are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Facebook i.e. Facebook and Alphabet go up and down completely randomly.

Pair Corralation between Facebook and Alphabet

Allowing for the 30-days total investment horizon, Facebook is expected to generate 1.13 times more return on investment than Alphabet. However, Facebook is 1.13 times more volatile than Alphabet. It trades about 0.09 of its potential returns per unit of risk. Alphabet is currently generating about 0.03 per unit of risk. If you would invest  19,282  in Facebook on April 25, 2020 and sell it today you would earn a total of  4,209  from holding Facebook or generate 21.83% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Facebook Inc  vs.  Alphabet Inc

 Performance (%) 
      Timeline 
Facebook 
66

Facebook Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Facebook are ranked lower than 6 (%) of all global equities and portfolios over the last 30 days. Despite somewhat unfluctuating basic indicators, Facebook sustained solid returns over the last few months and may actually be approaching a breakup point.
Alphabet 
11

Alphabet Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet are ranked lower than 1 (%) of all global equities and portfolios over the last 30 days. In spite of rather sound fundamental drivers, Alphabet is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Facebook and Alphabet Volatility Contrast

 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.


 
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