Correlation Between Alphabet and Fresh Harvest

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

Diversification Opportunities for Alphabet and Fresh Harvest

-0.29

Correlation Coefficient

Alphabet  Fresh Harvest

Very good diversification

The 3 months correlation between Alphabet and Fresh is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Fresh Harvest Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Harvest Products 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 Fresh Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Harvest Products has no effect on the direction of Alphabet i.e., Alphabet and Fresh Harvest go up and down completely randomly.

Pair Corralation between Alphabet and Fresh Harvest

Given the investment horizon of 90 days Alphabet is expected to generate 6.54 times less return on investment than Fresh Harvest. But when comparing it to its historical volatility, Alphabet Inc Class C is 11.25 times less risky than Fresh Harvest. It trades about 0.13 of its potential returns per unit of risk. Fresh Harvest Products is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Fresh Harvest Products on January 24, 2024 and sell it today you would lose (9.00) from holding Fresh Harvest Products or give up 9.57% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  Fresh Harvest Products

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.

Fresh Harvest Products

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Harvest Products are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Fresh Harvest demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Fresh Harvest

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

The idea behind Alphabet Inc Class C and Fresh Harvest Products 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.