Correlation Between Alphabet and New Horizon
Can any of the company-specific risk be diversified away by investing in both Alphabet and New Horizon 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 New Horizon 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 New Horizon Group, you can compare the effects of market volatilities on Alphabet and New Horizon 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 New Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and New Horizon.
Diversification Opportunities for Alphabet and New Horizon
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alphabet and New is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and New Horizon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Group 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Group has no effect on the direction of Alphabet i.e., Alphabet and New Horizon go up and down completely randomly.
Pair Corralation between Alphabet and New Horizon
Given the investment horizon of 90 days Alphabet is expected to generate 9.5 times less return on investment than New Horizon. But when comparing it to its historical volatility, Alphabet Inc Class C is 5.14 times less risky than New Horizon. It trades about 0.23 of its potential returns per unit of risk. New Horizon Group is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 36,990 in New Horizon Group on January 26, 2024 and sell it today you would earn a total of 18,810 from holding New Horizon Group or generate 50.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 76.19% |
| Values | Daily Returns |
Alphabet Inc Class C vs. New Horizon Group
Performance |
| Timeline |
| Alphabet Class C |
| New Horizon Group |
Alphabet and New Horizon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and New Horizon
The main advantage of trading using opposite Alphabet and New Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, New Horizon 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 New Horizon will offset losses from the drop in New Horizon's long position.The idea behind Alphabet Inc Class C and New Horizon 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.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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