Correlation Between Alphabet and GNS

Can any of the company-specific risk be diversified away by investing in both Alphabet and GNS 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 GNS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class A and The GNS Group, you can compare the effects of market volatilities on Alphabet and GNS 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 GNS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and GNS.

Diversification Opportunities for Alphabet and GNS

-0.59

Correlation Coefficient

Alphabet  GNS

Excellent diversification

The 3 months correlation between Alphabet and GNS is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and The GNS Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GNS Group 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 A are associated (or correlated) with GNS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GNS Group has no effect on the direction of Alphabet i.e., Alphabet and GNS go up and down completely randomly.

Pair Corralation between Alphabet and GNS

Assuming the 90 days horizon Alphabet is expected to generate 1.93 times less return on investment than GNS. But when comparing it to its historical volatility, Alphabet Inc Class A is 8.59 times less risky than GNS. It trades about 0.08 of its potential returns per unit of risk. The GNS Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,470  in The GNS Group on September 26, 2024 and sell it today you would lose (1,370) from holding The GNS Group or give up 93.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.68%
Values	Daily Returns

Alphabet Inc Class A  vs.  The GNS Group

Alphabet Class A

Risk-Adjusted Performance

13 of 100

Good

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

GNS Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The GNS Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alphabet and GNS

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

The idea behind Alphabet Inc Class A and The GNS Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.