Correlation Between Alphabet and Samchai Steel

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

Diversification Opportunities for Alphabet and Samchai Steel

0.53

Correlation Coefficient

Alphabet  Samchai Steel

Very weak diversification

The 3 months correlation between Alphabet and Samchai is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Samchai Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samchai Steel Industries 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 Samchai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samchai Steel Industries has no effect on the direction of Alphabet i.e., Alphabet and Samchai Steel go up and down completely randomly.

Pair Corralation between Alphabet and Samchai Steel

Given the investment horizon of 90 days Alphabet is expected to generate 22.28 times less return on investment than Samchai Steel. But when comparing it to its historical volatility, Alphabet Inc Class C is 33.11 times less risky than Samchai Steel. It trades about 0.08 of its potential returns per unit of risk. Samchai Steel Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Samchai Steel Industries on September 26, 2024 and sell it today you would lose (26.00) from holding Samchai Steel Industries or give up 54.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.78%
Values	Daily Returns

Alphabet Inc Class C  vs.  Samchai Steel Industries

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.

Samchai Steel Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samchai Steel Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Samchai Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Samchai Steel

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

The idea behind Alphabet Inc Class C and Samchai Steel Industries 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.