Correlation Between Alphabet and Delivery Hero

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

Diversification Opportunities for Alphabet and Delivery Hero

0.59

Correlation Coefficient

Alphabet  Delivery Hero

Very weak diversification

The 3 months correlation between Alphabet and Delivery is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Delivery Hero SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delivery Hero 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 Delivery Hero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delivery Hero SE has no effect on the direction of Alphabet i.e., Alphabet and Delivery Hero go up and down completely randomly.

Pair Corralation between Alphabet and Delivery Hero

Given the investment horizon of 90 days Alphabet is expected to generate 3.76 times less return on investment than Delivery Hero. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.84 times less risky than Delivery Hero. It trades about 0.08 of its potential returns per unit of risk. Delivery Hero SE is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  308.00  in Delivery Hero SE on September 2, 2024 and sell it today you would earn a total of  99.00  from holding Delivery Hero SE or generate 32.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Delivery Hero 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 January 2025.

Delivery Hero SE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delivery Hero SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Delivery Hero showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Delivery Hero

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

The idea behind Alphabet Inc Class C and Delivery Hero 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.