Correlation Between Alphabet and Mondelez International

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

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

Diversification Opportunities for Alphabet and Mondelez International

-0.47

Correlation Coefficient

Alphabet  Mondelez International

Very good diversification

The 3 months correlation between Alphabet and Mondelez is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Mondelez International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondelez International 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 C are associated (or correlated) with Mondelez International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondelez International has no effect on the direction of Alphabet i.e., Alphabet and Mondelez International go up and down completely randomly.

Pair Corralation between Alphabet and Mondelez International

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.84 times more return on investment than Mondelez International. However, Alphabet is 1.84 times more volatile than Mondelez International. It trades about 0.05 of its potential returns per unit of risk. Mondelez International is currently generating about 0.02 per unit of risk. If you would invest  11,479  in Alphabet Inc Class C on February 5, 2024 and sell it today you would earn a total of  5,420  from holding Alphabet Inc Class C or generate 47.22% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Mondelez International

Alphabet Class C

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Mondelez International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondelez International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alphabet and Mondelez International

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

The idea behind Alphabet Inc Class C and Mondelez International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.