Correlation Between Alphabet and Arena Group

Can any of the company-specific risk be diversified away by investing in both Alphabet and Arena Group 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 Arena Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class A and Arena Group Holdings, you can compare the effects of market volatilities on Alphabet and Arena Group 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 Arena Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Arena Group.

Diversification Opportunities for Alphabet and Arena Group

-0.84

Correlation Coefficient

Alphabet  Arena Group

Pay attention - limited upside

The 3 months correlation between Alphabet and Arena is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Arena Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Group Holdings 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 A are associated (or correlated) with Arena Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Group Holdings has no effect on the direction of Alphabet i.e., Alphabet and Arena Group go up and down completely randomly.

Pair Corralation between Alphabet and Arena Group

Assuming the 90 days horizon Alphabet Inc Class A is expected to generate 0.29 times more return on investment than Arena Group. However, Alphabet Inc Class A is 3.51 times less risky than Arena Group. It trades about 0.03 of its potential returns per unit of risk. Arena Group Holdings is currently generating about -0.04 per unit of risk. If you would invest  12,226  in Alphabet Inc Class A on January 24, 2024 and sell it today you would earn a total of  3,402  from holding Alphabet Inc Class A or generate 27.83% return on investment over 90 days.

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

Alphabet Inc Class A  vs.  Arena Group Holdings

Alphabet Class A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Alphabet is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Arena Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Arena Group is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Arena Group

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

The idea behind Alphabet Inc Class A and Arena Group Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..