Correlation Between Alphabet and LDG Investment

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

Diversification Opportunities for Alphabet and LDG Investment

-0.04

Correlation Coefficient

Alphabet  LDG Investment

Good diversification

The 3 months correlation between Alphabet and LDG is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and LDG Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LDG Investment JSC 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 LDG Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LDG Investment JSC has no effect on the direction of Alphabet i.e., Alphabet and LDG Investment go up and down completely randomly.

Pair Corralation between Alphabet and LDG Investment

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.62 times more return on investment than LDG Investment. However, Alphabet Inc Class C is 1.61 times less risky than LDG Investment. It trades about 0.04 of its potential returns per unit of risk. LDG Investment JSC is currently generating about -0.11 per unit of risk. If you would invest  17,834  in Alphabet Inc Class C on September 14, 2024 and sell it today you would earn a total of  1,304  from holding Alphabet Inc Class C or generate 7.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Alphabet Inc Class C  vs.  LDG Investment JSC

Alphabet Class C

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

LDG Investment JSC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LDG Investment JSC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, LDG Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and LDG Investment

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

The idea behind Alphabet Inc Class C and LDG Investment JSC 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.