Correlation Between MediaAlpha and Alphabet

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

By analyzing existing cross correlation between MediaAlpha and Alphabet Inc Class C, you can compare the effects of market volatilities on MediaAlpha and Alphabet 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 MediaAlpha with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of MediaAlpha and Alphabet.

Diversification Opportunities for MediaAlpha and Alphabet

-0.58

Correlation Coefficient

MediaAlpha  Alphabet

Excellent diversification

The 3 months correlation between MediaAlpha and Alphabet is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding MediaAlpha and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C and MediaAlpha 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 MediaAlpha are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of MediaAlpha i.e., MediaAlpha and Alphabet go up and down completely randomly.

Pair Corralation between MediaAlpha and Alphabet

Considering the 90-day investment horizon MediaAlpha is expected to under-perform the Alphabet. In addition to that, MediaAlpha is 3.1 times more volatile than Alphabet Inc Class C. It trades about -0.08 of its total potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.04 per unit of volatility. If you would invest  16,489  in Alphabet Inc Class C on August 30, 2024 and sell it today you would earn a total of  593.00  from holding Alphabet Inc Class C or generate 3.6% return on investment over 90 days.

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

MediaAlpha  vs.  Alphabet Inc Class C

MediaAlpha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MediaAlpha has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Alphabet Class C

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MediaAlpha and Alphabet

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

The idea behind MediaAlpha and Alphabet Inc Class C 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.