Correlation Between Alphabet and Rex Energy

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

Diversification Opportunities for Alphabet and Rex Energy

0.0

Correlation Coefficient

Alphabet  Rex Energy

Pay attention - limited upside

The 3 months correlation between Alphabet and Rex is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Rex Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rex Energy 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 Rex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rex Energy has no effect on the direction of Alphabet i.e., Alphabet and Rex Energy go up and down completely randomly.

Pair Corralation between Alphabet and Rex Energy

If you would invest  15,637  in Alphabet Inc Class C on February 3, 2024 and sell it today you would earn a total of  1,209  from holding Alphabet Inc Class C or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Rex Energy

Alphabet Class C

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Rex Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rex Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Rex Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Rex Energy

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

The idea behind Alphabet Inc Class C and Rex Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.