Correlation Between Alphabet and China Aircraft

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

Diversification Opportunities for Alphabet and China Aircraft

-0.81

Correlation Coefficient

Alphabet  China Aircraft

Pay attention - limited upside

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

Pair Corralation between Alphabet and China Aircraft

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 2.21 times more return on investment than China Aircraft. However, Alphabet is 2.21 times more volatile than China Aircraft Leasing. It trades about 0.19 of its potential returns per unit of risk. China Aircraft Leasing is currently generating about -0.08 per unit of risk. If you would invest  14,220  in Alphabet Inc Class C on February 20, 2024 and sell it today you would earn a total of  3,509  from holding Alphabet Inc Class C or generate 24.68% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  China Aircraft Leasing

Alphabet Class C

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, China Aircraft is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and China Aircraft

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

The idea behind Alphabet Inc Class C and China Aircraft Leasing 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.