Correlation Between Alphabet and BSP Financial

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

Diversification Opportunities for Alphabet and BSP Financial

0.06

Correlation Coefficient

Alphabet  BSP Financial

Significant diversification

The 3 months correlation between Alphabet and BSP is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and BSP Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSP Financial Group 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 BSP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSP Financial Group has no effect on the direction of Alphabet i.e., Alphabet and BSP Financial go up and down completely randomly.

Pair Corralation between Alphabet and BSP Financial

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.96 times more return on investment than BSP Financial. However, Alphabet Inc Class C is 1.05 times less risky than BSP Financial. It trades about 0.08 of its potential returns per unit of risk. BSP Financial Group is currently generating about 0.05 per unit of risk. If you would invest  15,840  in Alphabet Inc Class C on September 2, 2024 and sell it today you would earn a total of  1,209  from holding Alphabet Inc Class C or generate 7.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

Alphabet Inc Class C  vs.  BSP Financial Group

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 January 2025.

BSP Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BSP Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, BSP Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alphabet and BSP Financial

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

The idea behind Alphabet Inc Class C and BSP Financial Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.