Correlation Between Alphabet and Smart Share

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

Diversification Opportunities for Alphabet and Smart Share

0.54

Correlation Coefficient

Alphabet  Smart Share

Very weak diversification

The 3 months correlation between Alphabet and Smart is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Smart Share Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Share Global 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 Smart Share. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Share Global has no effect on the direction of Alphabet i.e., Alphabet and Smart Share go up and down completely randomly.

Pair Corralation between Alphabet and Smart Share

Given the investment horizon of 90 days Alphabet is expected to generate 6.5 times less return on investment than Smart Share. But when comparing it to its historical volatility, Alphabet Inc Class C is 2.33 times less risky than Smart Share. It trades about 0.18 of its potential returns per unit of risk. Smart Share Global is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Smart Share Global on February 13, 2024 and sell it today you would earn a total of  47.00  from holding Smart Share Global or generate 78.33% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Smart Share Global

Alphabet Class C

Risk-Adjusted Performance

10 of 100

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

Smart Share Global

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Smart Share

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

The idea behind Alphabet Inc Class C and Smart Share Global 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.