Correlation Between Alphabet and Astec Industries

Can any of the company-specific risk be diversified away by investing in both Alphabet and Astec Industries 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 Astec Industries 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 Astec Industries, you can compare the effects of market volatilities on Alphabet and Astec Industries 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 Astec Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Astec Industries.

Diversification Opportunities for Alphabet and Astec Industries

0.35

Correlation Coefficient

Alphabet  Astec Industries

Weak diversification

The 3 months correlation between Alphabet and Astec is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries 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 Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of Alphabet i.e., Alphabet and Astec Industries go up and down completely randomly.

Pair Corralation between Alphabet and Astec Industries

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.66 times more return on investment than Astec Industries. However, Alphabet Inc Class C is 1.52 times less risky than Astec Industries. It trades about 0.12 of its potential returns per unit of risk. Astec Industries is currently generating about 0.01 per unit of risk. If you would invest  9,030  in Alphabet Inc Class C on January 24, 2024 and sell it today you would earn a total of  6,962  from holding Alphabet Inc Class C or generate 77.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Astec Industries

Alphabet Class C

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Astec Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Astec Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Astec Industries

The main advantage of trading using opposite Alphabet and Astec Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Astec Industries 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 Astec Industries will offset losses from the drop in Astec Industries' long position.

The idea behind Alphabet Inc Class C and Astec Industries 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.