Correlation Between Alphabet and Brait SE

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

Diversification Opportunities for Alphabet and Brait SE

0.8

Correlation Coefficient

Alphabet  Brait SE

Very poor diversification

The 3 months correlation between Alphabet and Brait is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Brait SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brait SE 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 Brait SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brait SE has no effect on the direction of Alphabet i.e., Alphabet and Brait SE go up and down completely randomly.

Pair Corralation between Alphabet and Brait SE

Given the investment horizon of 90 days Alphabet is expected to generate 8.45 times less return on investment than Brait SE. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.74 times less risky than Brait SE. It trades about 0.08 of its potential returns per unit of risk. Brait SE is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  10,200  in Brait SE on September 1, 2024 and sell it today you would earn a total of  9,900  from holding Brait SE or generate 97.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

Alphabet Inc Class C  vs.  Brait SE

Alphabet Class C

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Brait SE

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brait SE are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Brait SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Brait SE

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

The idea behind Alphabet Inc Class C and Brait SE 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.