Correlation Between Phoenix New and Alphabet

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

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

Diversification Opportunities for Phoenix New and Alphabet

-0.64

Correlation Coefficient

Phoenix New  Alphabet

Excellent diversification

The 3 months correlation between Phoenix and Alphabet is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix New Media 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 Phoenix New 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 Phoenix New Media 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 Phoenix New i.e., Phoenix New and Alphabet go up and down completely randomly.

Pair Corralation between Phoenix New and Alphabet

Given the investment horizon of 90 days Phoenix New Media is expected to under-perform the Alphabet. In addition to that, Phoenix New is 2.25 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 0.35 per unit of volatility. If you would invest  16,924  in Alphabet Inc Class C on September 25, 2024 and sell it today you would earn a total of  2,833  from holding Alphabet Inc Class C or generate 16.74% return on investment over 90 days.

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

Phoenix New Media  vs.  Alphabet Inc Class C

Phoenix New Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phoenix New Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alphabet Class C

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phoenix New and Alphabet

The main advantage of trading using opposite Phoenix New and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phoenix New 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 Phoenix New Media 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.