Correlation Between Alphabet and MediaAlpha

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

Diversification Opportunities for Alphabet and MediaAlpha

-0.09

Correlation Coefficient

Alphabet  MediaAlpha

Good diversification

The 3 months correlation between Alphabet and MediaAlpha is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and MediaAlpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaAlpha 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 MediaAlpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaAlpha has no effect on the direction of Alphabet i.e., Alphabet and MediaAlpha go up and down completely randomly.

Pair Corralation between Alphabet and MediaAlpha

Assuming the 90 days horizon Alphabet Inc Class A is expected to generate 0.92 times more return on investment than MediaAlpha. However, Alphabet Inc Class A is 1.09 times less risky than MediaAlpha. It trades about 0.13 of its potential returns per unit of risk. MediaAlpha is currently generating about -0.1 per unit of risk. If you would invest  15,549  in Alphabet Inc Class A on January 31, 2024 and sell it today you would earn a total of  1,066  from holding Alphabet Inc Class A or generate 6.86% return on investment over 90 days.

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

Alphabet Inc Class A  vs.  MediaAlpha

Alphabet Class A

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Alphabet disclosed solid returns over the last few months and may actually be approaching a breakup point.

MediaAlpha

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaAlpha are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MediaAlpha showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and MediaAlpha

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

The idea behind Alphabet Inc Class A and MediaAlpha 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.