Correlation Between Alphabet and Aumann AG

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

Diversification Opportunities for Alphabet and Aumann AG

0.3

Correlation Coefficient

Alphabet  Aumann AG

Weak diversification

The 3 months correlation between Alphabet and Aumann is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Aumann AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aumann AG 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 Aumann AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aumann AG has no effect on the direction of Alphabet i.e., Alphabet and Aumann AG go up and down completely randomly.

Pair Corralation between Alphabet and Aumann AG

Given the investment horizon of 90 days Alphabet is expected to generate 4.94 times less return on investment than Aumann AG. But when comparing it to its historical volatility, Alphabet Inc Class C is 2.81 times less risky than Aumann AG. It trades about 0.14 of its potential returns per unit of risk. Aumann AG is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,774  in Aumann AG on March 9, 2024 and sell it today you would earn a total of  254.00  from holding Aumann AG or generate 14.32% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Aumann AG

Alphabet Class C

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Aumann AG

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aumann AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Aumann AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Aumann AG

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

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