Correlation Between NetApp and Alphabet

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Can any of the company-specific risk be diversified away by investing in both NetApp and Alphabet 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 NetApp and Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetApp Inc and Alphabet Class C, you can compare the effects of market volatilities on NetApp and Alphabet 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 NetApp with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetApp and Alphabet.

Diversification Opportunities for NetApp and Alphabet

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between NetApp and Alphabet is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and Alphabet Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C and NetApp 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 NetApp Inc are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of NetApp i.e., NetApp and Alphabet go up and down completely randomly.

Pair Corralation between NetApp and Alphabet

Given the investment horizon of 90 days NetApp Inc is expected to generate 0.92 times more return on investment than Alphabet. However, NetApp Inc is 1.09 times less risky than Alphabet. It trades about 0.05 of its potential returns per unit of risk. Alphabet Class C is currently generating about 0.03 per unit of risk. If you would invest  7,332  in NetApp Inc on December 30, 2023 and sell it today you would earn a total of  3,165  from holding NetApp Inc or generate 43.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

NetApp Inc  vs.  Alphabet Class C

 Performance 
       Timeline  
NetApp Inc 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.
Alphabet Class C 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class C are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in April 2024.

NetApp and Alphabet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NetApp and Alphabet

The main advantage of trading using opposite NetApp and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.
The idea behind NetApp Inc and Alphabet Class C 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.
Check out your portfolio center.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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