Correlation Between Alphabet and PSB Holdings

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

Diversification Opportunities for Alphabet and PSB Holdings

-0.21

Correlation Coefficient

Alphabet  PSB Holdings

Very good diversification

The 3 months correlation between Alphabet and PSB is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings 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 PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of Alphabet i.e., Alphabet and PSB Holdings go up and down completely randomly.

Pair Corralation between Alphabet and PSB Holdings

Given the investment horizon of 90 days Alphabet is expected to generate 8.43 times less return on investment than PSB Holdings. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.12 times less risky than PSB Holdings. It trades about 0.02 of its potential returns per unit of risk. PSB Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,500  in PSB Holdings on July 22, 2024 and sell it today you would earn a total of  70.00  from holding PSB Holdings or generate 2.8% 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 C  vs.  PSB Holdings

Alphabet Class C

Risk-Adjusted Performance

0 of 100

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 unfluctuating 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.

PSB Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PSB Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, PSB Holdings may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Alphabet and PSB Holdings

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

The idea behind Alphabet Inc Class C and PSB Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .