Correlation Between Alphabet and RMK Energy

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

Diversification Opportunities for Alphabet and RMK Energy

-0.66

Correlation Coefficient

Alphabet  RMK Energy

Excellent diversification

The 3 months correlation between Alphabet and RMK is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and RMK Energy PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMK Energy PT 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 RMK Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMK Energy PT has no effect on the direction of Alphabet i.e., Alphabet and RMK Energy go up and down completely randomly.

Pair Corralation between Alphabet and RMK Energy

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.82 times more return on investment than RMK Energy. However, Alphabet Inc Class C is 1.22 times less risky than RMK Energy. It trades about 0.18 of its potential returns per unit of risk. RMK Energy PT is currently generating about -0.08 per unit of risk. If you would invest  15,881  in Alphabet Inc Class C on September 16, 2024 and sell it today you would earn a total of  3,257  from holding Alphabet Inc Class C or generate 20.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Alphabet Inc Class C  vs.  RMK Energy PT

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.

RMK Energy PT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMK Energy PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Alphabet and RMK Energy

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

The idea behind Alphabet Inc Class C and RMK Energy PT 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.