Correlation Between Alphabet and Thyssenkrupp

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

Diversification Opportunities for Alphabet and Thyssenkrupp

0.62

Correlation Coefficient

Alphabet  Thyssenkrupp

Poor diversification

The 3 months correlation between Alphabet and Thyssenkrupp is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Thyssenkrupp AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thyssenkrupp AG ADR 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thyssenkrupp AG ADR has no effect on the direction of Alphabet i.e., Alphabet and Thyssenkrupp go up and down completely randomly.

Pair Corralation between Alphabet and Thyssenkrupp

Given the investment horizon of 90 days Alphabet is expected to generate 1.18 times less return on investment than Thyssenkrupp. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.9 times less risky than Thyssenkrupp. It trades about 0.14 of its potential returns per unit of risk. Thyssenkrupp AG ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  354.00  in Thyssenkrupp AG ADR on September 21, 2024 and sell it today you would earn a total of  61.00  from holding Thyssenkrupp AG ADR or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Alphabet Inc Class C  vs.  Thyssenkrupp AG ADR

Alphabet Class C

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 11 (%) 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.

Thyssenkrupp AG ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thyssenkrupp AG ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent primary indicators, Thyssenkrupp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Thyssenkrupp

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

The idea behind Alphabet Inc Class C and Thyssenkrupp AG ADR 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.