Correlation Between Alphabet and SERO

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

Diversification Opportunities for Alphabet and SERO

-0.56

Correlation Coefficient

Alphabet  SERO

Excellent diversification

The 3 months correlation between Alphabet and SERO is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and SERO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERO 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 SERO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERO has no effect on the direction of Alphabet i.e., Alphabet and SERO go up and down completely randomly.

Pair Corralation between Alphabet and SERO

Given the investment horizon of 90 days Alphabet is expected to generate 12.83 times less return on investment than SERO. But when comparing it to its historical volatility, Alphabet Inc Class C is 8.39 times less risky than SERO. It trades about 0.08 of its potential returns per unit of risk. SERO is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.57  in SERO on September 2, 2024 and sell it today you would earn a total of  1.24  from holding SERO or generate 78.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Alphabet Inc Class C  vs.  SERO

Alphabet Class C

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SERO

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SERO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SERO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and SERO

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

The idea behind Alphabet Inc Class C and SERO 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.