Correlation Between Alphabet and SIFCO Industries

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

Diversification Opportunities for Alphabet and SIFCO Industries

-0.8

Correlation Coefficient

Alphabet  SIFCO Industries

Pay attention - limited upside

The 3 months correlation between Alphabet and SIFCO is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and SIFCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIFCO Industries 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 SIFCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIFCO Industries has no effect on the direction of Alphabet i.e., Alphabet and SIFCO Industries go up and down completely randomly.

Pair Corralation between Alphabet and SIFCO Industries

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the SIFCO Industries. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.5 times less risky than SIFCO Industries. The stock trades about -0.07 of its potential returns per unit of risk. The SIFCO Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  367.00  in SIFCO Industries on August 31, 2024 and sell it today you would earn a total of  8.00  from holding SIFCO Industries or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  SIFCO Industries

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 December 2024.

SIFCO Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIFCO Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alphabet and SIFCO Industries

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

The idea behind Alphabet Inc Class C and SIFCO Industries 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.