Correlation Between Alphabet and Depo Auto

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

Diversification Opportunities for Alphabet and Depo Auto

-0.78

Correlation Coefficient

Alphabet  Depo Auto

Pay attention - limited upside

The 3 months correlation between Alphabet and Depo is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Depo Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Depo Auto Parts 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 Depo Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Depo Auto Parts has no effect on the direction of Alphabet i.e., Alphabet and Depo Auto go up and down completely randomly.

Pair Corralation between Alphabet and Depo Auto

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.09 times more return on investment than Depo Auto. However, Alphabet is 1.09 times more volatile than Depo Auto Parts. It trades about 0.15 of its potential returns per unit of risk. Depo Auto Parts is currently generating about -0.17 per unit of risk. If you would invest  16,345  in Alphabet Inc Class C on September 24, 2024 and sell it today you would earn a total of  2,951  from holding Alphabet Inc Class C or generate 18.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Alphabet Inc Class C  vs.  Depo Auto Parts

Alphabet Class C

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 12 (%) 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.

Depo Auto Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Depo Auto Parts 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 Depo Auto

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

The idea behind Alphabet Inc Class C and Depo Auto Parts 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.