Correlation Between Alphabet and Epitomee Medical

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

Diversification Opportunities for Alphabet and Epitomee Medical

0.41

Correlation Coefficient

Alphabet  Epitomee Medical

Very weak diversification

The 3 months correlation between Alphabet and Epitomee is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Epitomee Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Epitomee Medical 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 Epitomee Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Epitomee Medical has no effect on the direction of Alphabet i.e., Alphabet and Epitomee Medical go up and down completely randomly.

Pair Corralation between Alphabet and Epitomee Medical

Given the investment horizon of 90 days Alphabet is expected to generate 1.39 times less return on investment than Epitomee Medical. But when comparing it to its historical volatility, Alphabet Inc Class C is 3.79 times less risky than Epitomee Medical. It trades about 0.14 of its potential returns per unit of risk. Epitomee Medical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  88,740  in Epitomee Medical on September 29, 2024 and sell it today you would earn a total of  6,010  from holding Epitomee Medical or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	74.6%
Values	Daily Returns

Alphabet Inc Class C  vs.  Epitomee Medical

Alphabet Class C

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 11 (%) 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.

Epitomee Medical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Epitomee Medical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Epitomee Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Epitomee Medical

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

The idea behind Alphabet Inc Class C and Epitomee Medical 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.