Correlation Between Alphabet and Pax Small

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

Diversification Opportunities for Alphabet and Pax Small

0.81

Correlation Coefficient

Alphabet  Pax Small

Very poor diversification

The 3 months correlation between Alphabet and Pax is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Pax Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Small Cap 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 Pax Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Small Cap has no effect on the direction of Alphabet i.e., Alphabet and Pax Small go up and down completely randomly.

Pair Corralation between Alphabet and Pax Small

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.71 times more return on investment than Pax Small. However, Alphabet is 1.71 times more volatile than Pax Small Cap. It trades about 0.13 of its potential returns per unit of risk. Pax Small Cap is currently generating about 0.12 per unit of risk. If you would invest  16,585  in Alphabet Inc Class C on May 4, 2025 and sell it today you would earn a total of  2,410  from holding Alphabet Inc Class C or generate 14.53% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Pax Small Cap

Alphabet Class C

Risk-Adjusted Performance

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 conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pax Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Pax Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Alphabet and Pax Small

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

The idea behind Alphabet Inc Class C and Pax Small Cap 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.