Correlation Between Vertiv Holdings and ALPHABET

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

By analyzing existing cross correlation between Vertiv Holdings Co and ALPHABET INC, you can compare the effects of market volatilities on Vertiv Holdings 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 Vertiv Holdings with a short position of ALPHABET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vertiv Holdings and ALPHABET.

Diversification Opportunities for Vertiv Holdings and ALPHABET

-0.56

Correlation Coefficient

Vertiv Holdings  ALPHABET

Excellent diversification

The 3 months correlation between Vertiv and ALPHABET is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vertiv Holdings Co and ALPHABET INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPHABET INC and Vertiv Holdings 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 Vertiv Holdings Co 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 INC has no effect on the direction of Vertiv Holdings i.e., Vertiv Holdings and ALPHABET go up and down completely randomly.

Pair Corralation between Vertiv Holdings and ALPHABET

Considering the 90-day investment horizon Vertiv Holdings Co is expected to generate 4.84 times more return on investment than ALPHABET. However, Vertiv Holdings is 4.84 times more volatile than ALPHABET INC. It trades about 0.21 of its potential returns per unit of risk. ALPHABET INC is currently generating about -0.14 per unit of risk. If you would invest  8,301  in Vertiv Holdings Co on August 30, 2024 and sell it today you would earn a total of  4,393  from holding Vertiv Holdings Co or generate 52.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Vertiv Holdings Co  vs.  ALPHABET INC

Vertiv Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vertiv Holdings Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vertiv Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

ALPHABET INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALPHABET INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALPHABET is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vertiv Holdings and ALPHABET

The main advantage of trading using opposite Vertiv Holdings and ALPHABET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertiv Holdings 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 Vertiv Holdings Co and ALPHABET INC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.