Correlation Between Alphabet and New Found

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

By analyzing existing cross correlation between Alphabet Inc CDR and New Found Gold, you can compare the effects of market volatilities on Alphabet and New Found 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 New Found. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and New Found.

Diversification Opportunities for Alphabet and New Found

-0.7

Correlation Coefficient

Alphabet  New Found

Excellent diversification

The 3 months correlation between Alphabet and New is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and New Found Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Found Gold 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 CDR are associated (or correlated) with New Found. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Found Gold has no effect on the direction of Alphabet i.e., Alphabet and New Found go up and down completely randomly.

Pair Corralation between Alphabet and New Found

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to generate 0.47 times more return on investment than New Found. However, Alphabet Inc CDR is 2.13 times less risky than New Found. It trades about 0.15 of its potential returns per unit of risk. New Found Gold is currently generating about -0.13 per unit of risk. If you would invest  2,784  in Alphabet Inc CDR on September 28, 2024 and sell it today you would earn a total of  495.00  from holding Alphabet Inc CDR or generate 17.78% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  New Found Gold

Alphabet CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Alphabet exhibited solid returns over the last few months and may actually be approaching a breakup point.

New Found Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Found Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Alphabet and New Found

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

The idea behind Alphabet Inc CDR and New Found Gold 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.