Correlation Between Alphabet and Outbrain

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

Diversification Opportunities for Alphabet and Outbrain

0.28

Correlation Coefficient

Alphabet  Outbrain

Modest diversification

The 3 months correlation between Alphabet and Outbrain is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Outbrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outbrain 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 Outbrain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outbrain has no effect on the direction of Alphabet i.e., Alphabet and Outbrain go up and down completely randomly.

Pair Corralation between Alphabet and Outbrain

Assuming the 90 days horizon Alphabet is expected to generate 1.11 times less return on investment than Outbrain. But when comparing it to its historical volatility, Alphabet Inc Class A is 1.57 times less risky than Outbrain. It trades about 0.1 of its potential returns per unit of risk. Outbrain is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Outbrain on September 4, 2024 and sell it today you would earn a total of  49.00  from holding Outbrain or generate 9.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class A  vs.  Outbrain

Alphabet Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Outbrain

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Outbrain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Outbrain may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alphabet and Outbrain

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

The idea behind Alphabet Inc Class A and Outbrain 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.