Correlation Between Alphabet and Big Lots

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

Diversification Opportunities for Alphabet and Big Lots

-0.35

Correlation Coefficient

Alphabet  Big Lots

Very good diversification

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

Pair Corralation between Alphabet and Big Lots

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.23 times more return on investment than Big Lots. However, Alphabet Inc Class C is 4.27 times less risky than Big Lots. It trades about 0.23 of its potential returns per unit of risk. Big Lots is currently generating about -0.09 per unit of risk. If you would invest  15,115  in Alphabet Inc Class C on January 25, 2024 and sell it today you would earn a total of  995.00  from holding Alphabet Inc Class C or generate 6.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Big Lots

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 stable basic indicators, Alphabet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Big Lots

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alphabet and Big Lots

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

The idea behind Alphabet Inc Class C and Big Lots 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.