Two Equities Correlation Analysis

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Alphabet and NYSE Composite 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 NYSE Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.
This model provides you with a quick lookup of cross correlation between two equities. Please specify two instruments to run the correlation.

Diversification Opportunities for Alphabet and NYSE Composite

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between Alphabet and NYSE is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Class C and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite 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 Class C are associated (or correlated) with NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of Alphabet i.e., Alphabet and NYSE Composite go up and down completely randomly.
    Optimize

Pair Corralation between Alphabet and NYSE Composite

Given the investment horizon of 90 days Alphabet Class C is expected to generate 2.36 times more return on investment than NYSE Composite. However, Alphabet is 2.36 times more volatile than NYSE Composite. It trades about 0.11 of its potential returns per unit of risk. NYSE Composite is currently generating about 0.08 per unit of risk. If you would invest  9,558  in Alphabet Class C on December 29, 2023 and sell it today you would earn a total of  5,636  from holding Alphabet Class C or generate 58.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alphabet Class C  vs.  NYSE Composite

 Performance 
       Timeline  

Alphabet and NYSE Composite Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alphabet and NYSE Composite

The main advantage of trading using opposite Alphabet and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.
The idea behind Alphabet Class C and NYSE Composite 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

Other Complementary Tools

Analyst Advice
Analyst recommendations and target price estimates broken down by several categories
Stock Tickers
Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Transaction History
View history of all your transactions and understand their impact on performance
Stock Screener
Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.