Correlation Between Alphabet and Security Federal

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

Diversification Opportunities for Alphabet and Security Federal

0.4

Correlation Coefficient

Alphabet  Security Federal

Very weak diversification

The 3 months correlation between Alphabet and Security is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Security Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Federal 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 Security Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Federal has no effect on the direction of Alphabet i.e., Alphabet and Security Federal go up and down completely randomly.

Pair Corralation between Alphabet and Security Federal

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.73 times more return on investment than Security Federal. However, Alphabet Inc Class C is 1.37 times less risky than Security Federal. It trades about 0.1 of its potential returns per unit of risk. Security Federal is currently generating about 0.02 per unit of risk. If you would invest  8,646  in Alphabet Inc Class C on September 26, 2024 and sell it today you would earn a total of  11,111  from holding Alphabet Inc Class C or generate 128.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.98%
Values	Daily Returns

Alphabet Inc Class C  vs.  Security Federal

Alphabet Class C

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Security Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Security Federal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Security Federal 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 Security Federal

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

The idea behind Alphabet Inc Class C and Security Federal 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.