Correlation Between Alphabet and Cognition Therapeutics

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

Diversification Opportunities for Alphabet and Cognition Therapeutics

0.56

Correlation Coefficient

Alphabet  Cognition Therapeutics

Very weak diversification

The 3 months correlation between Alphabet and Cognition is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Cognition Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognition Therapeutics 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 Cognition Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognition Therapeutics has no effect on the direction of Alphabet i.e., Alphabet and Cognition Therapeutics go up and down completely randomly.

Pair Corralation between Alphabet and Cognition Therapeutics

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.37 times more return on investment than Cognition Therapeutics. However, Alphabet Inc Class C is 2.73 times less risky than Cognition Therapeutics. It trades about 0.15 of its potential returns per unit of risk. Cognition Therapeutics is currently generating about -0.06 per unit of risk. If you would invest  15,550  in Alphabet Inc Class C on February 15, 2025 and sell it today you would earn a total of  1,193  from holding Alphabet Inc Class C or generate 7.67% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Cognition Therapeutics

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cognition Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognition Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alphabet and Cognition Therapeutics

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

The idea behind Alphabet Inc Class C and Cognition Therapeutics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.