Correlation Between Alphabet and Kuaishou Technology

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

Diversification Opportunities for Alphabet and Kuaishou Technology

0.66

Correlation Coefficient

Alphabet  Kuaishou Technology

Poor diversification

The 3 months correlation between Alphabet and Kuaishou is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Kuaishou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuaishou Technology 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 Kuaishou Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuaishou Technology has no effect on the direction of Alphabet i.e., Alphabet and Kuaishou Technology go up and down completely randomly.

Pair Corralation between Alphabet and Kuaishou Technology

Assuming the 90 days horizon Alphabet Inc Class A is expected to generate 0.42 times more return on investment than Kuaishou Technology. However, Alphabet Inc Class A is 2.4 times less risky than Kuaishou Technology. It trades about 0.22 of its potential returns per unit of risk. Kuaishou Technology is currently generating about 0.08 per unit of risk. If you would invest  13,767  in Alphabet Inc Class A on March 9, 2024 and sell it today you would earn a total of  3,906  from holding Alphabet Inc Class A or generate 28.37% return on investment over 90 days.

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

Alphabet Inc Class A  vs.  Kuaishou Technology

Alphabet Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, Alphabet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kuaishou Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kuaishou Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Kuaishou Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Kuaishou Technology

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

The idea behind Alphabet Inc Class A and Kuaishou Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.