Correlation Between Alphabet and Newtek Business

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

Diversification Opportunities for Alphabet and Newtek Business

0.78

Correlation Coefficient

Alphabet  Newtek Business

Poor diversification

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

Pair Corralation between Alphabet and Newtek Business

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  3,887  from holding Alphabet Inc Class C or generate 24.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Newtek Business Services

Alphabet Class C

Risk-Adjusted Performance

16 of 100

Good

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.

Newtek Business Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtek Business Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newtek Business is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Alphabet and Newtek Business

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

The idea behind Alphabet Inc Class C and Newtek Business Services 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 Global Correlations module to find global opportunities by holding instruments from different markets.