Correlation Between Alphabet and Sinotruk

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

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

Diversification Opportunities for Alphabet and Sinotruk

0.18

Correlation Coefficient

Alphabet  Sinotruk

Average diversification

The 3 months correlation between Alphabet and Sinotruk is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Sinotruk Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotruk Limited 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 C are associated (or correlated) with Sinotruk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotruk Limited has no effect on the direction of Alphabet i.e., Alphabet and Sinotruk go up and down completely randomly.

Pair Corralation between Alphabet and Sinotruk

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.63 times more return on investment than Sinotruk. However, Alphabet Inc Class C is 1.59 times less risky than Sinotruk. It trades about 0.14 of its potential returns per unit of risk. Sinotruk Limited is currently generating about 0.03 per unit of risk. If you would invest  16,700  in Alphabet Inc Class C on September 29, 2024 and sell it today you would earn a total of  2,704  from holding Alphabet Inc Class C or generate 16.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Alphabet Inc Class C  vs.  Sinotruk Limited

Alphabet Class C

Risk-Adjusted Performance

11 of 100

Good

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

Sinotruk Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinotruk Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sinotruk may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alphabet and Sinotruk

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

The idea behind Alphabet Inc Class C and Sinotruk Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.