Correlation Between Alphabet and Campbell Soup

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

Diversification Opportunities for Alphabet and Campbell Soup

0.86

Correlation Coefficient

Alphabet  Campbell Soup

Very poor diversification

The 3 months correlation between Alphabet and Campbell is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup 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 Campbell Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Soup has no effect on the direction of Alphabet i.e., Alphabet and Campbell Soup go up and down completely randomly.

Pair Corralation between Alphabet and Campbell Soup

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.67 times more return on investment than Campbell Soup. However, Alphabet is 1.67 times more volatile than Campbell Soup. It trades about 0.19 of its potential returns per unit of risk. Campbell Soup is currently generating about 0.15 per unit of risk. If you would invest  14,220  in Alphabet Inc Class C on February 19, 2024 and sell it today you would earn a total of  3,509  from holding Alphabet Inc Class C or generate 24.68% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Campbell Soup

Alphabet Class C

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Campbell Soup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Campbell Soup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Campbell Soup may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Alphabet and Campbell Soup

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

The idea behind Alphabet Inc Class C and Campbell Soup 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.