Correlation Between Alphabet and Global Knafaim

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

Diversification Opportunities for Alphabet and Global Knafaim

0.78

Correlation Coefficient

Alphabet  Global Knafaim

Poor diversification

The 3 months correlation between Alphabet and Global is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Global Knafaim Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Knafaim Leasing 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 Global Knafaim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Knafaim Leasing has no effect on the direction of Alphabet i.e., Alphabet and Global Knafaim go up and down completely randomly.

Pair Corralation between Alphabet and Global Knafaim

Given the investment horizon of 90 days Alphabet is expected to generate 2.12 times less return on investment than Global Knafaim. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.61 times less risky than Global Knafaim. It trades about 0.21 of its potential returns per unit of risk. Global Knafaim Leasing is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  5,720  in Global Knafaim Leasing on September 14, 2024 and sell it today you would earn a total of  2,230  from holding Global Knafaim Leasing or generate 38.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.02%
Values	Daily Returns

Alphabet Inc Class C  vs.  Global Knafaim Leasing

Alphabet Class C

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 16 (%) 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.

Global Knafaim Leasing

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Knafaim Leasing are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Global Knafaim sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Global Knafaim

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

The idea behind Alphabet Inc Class C and Global Knafaim Leasing 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.