Correlation Between Outbrain and Alphabet Class

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

By analyzing existing cross correlation between Outbrain and Alphabet Class A, you can compare the effects of market volatilities on Outbrain and Alphabet Class 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 Outbrain with a short position of Alphabet Class. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outbrain and Alphabet Class.

Diversification Opportunities for Outbrain and Alphabet Class

Modest diversification

The 3 months correlation between Outbrain and Alphabet is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Outbrain and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A and Outbrain 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 Outbrain are associated (or correlated) with Alphabet Class. 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 A has no effect on the direction of Outbrain i.e., Outbrain and Alphabet Class go up and down completely randomly.

Pair Corralation between Outbrain and Alphabet Class

Allowing for the 90-day total investment horizon Outbrain is expected to under-perform the Alphabet Class. In addition to that, Outbrain is 1.83 times more volatile than Alphabet Class A. It trades about -0.04 of its total potential returns per unit of risk. Alphabet Class A is currently generating about 0.01 per unit of volatility. If you would invest  13,891  in Alphabet Class A on July 2, 2023 and sell it today you would lose (805.00) from holding Alphabet Class A or give up 5.8% of portfolio value over 90 days.

Outbrain  vs.  Alphabet Class A

Outbrain

Outbrain Performance

0 of 100

Over the last 90 days Outbrain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Outbrain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alphabet Class A

Alphabet Performance

7 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Alphabet Class may actually be approaching a critical reversion point that can send shares even higher in October 2023.

Pair Trading with Outbrain and Alphabet Class

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

The idea behind Outbrain and Alphabet Class A 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.