Correlation Between Alphabet and Ampol

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

Diversification Opportunities for Alphabet and Ampol

-0.66

Correlation Coefficient

Alphabet  Ampol

Excellent diversification

The 3 months correlation between Alphabet and Ampol is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Ampol Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol Ltd ADR 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 Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol Ltd ADR has no effect on the direction of Alphabet i.e., Alphabet and Ampol go up and down completely randomly.

Pair Corralation between Alphabet and Ampol

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.86 times more return on investment than Ampol. However, Alphabet Inc Class C is 1.16 times less risky than Ampol. It trades about 0.17 of its potential returns per unit of risk. Ampol Ltd ADR is currently generating about -0.09 per unit of risk. If you would invest  16,010  in Alphabet Inc Class C on September 17, 2024 and sell it today you would earn a total of  3,128  from holding Alphabet Inc Class C or generate 19.54% 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.  Ampol Ltd ADR

Alphabet Class C

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Ampol Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampol Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alphabet and Ampol

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

The idea behind Alphabet Inc Class C and Ampol Ltd ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.