Correlation Between Alphabet and LendingClub Corp

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

Diversification Opportunities for Alphabet and LendingClub Corp

0.08

Correlation Coefficient

Alphabet  LendingClub Corp

Significant diversification

The 3 months correlation between Alphabet and LendingClub is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and LendingClub Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub Corp 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 LendingClub Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub Corp has no effect on the direction of Alphabet i.e., Alphabet and LendingClub Corp go up and down completely randomly.

Pair Corralation between Alphabet and LendingClub Corp

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.16 times more return on investment than LendingClub Corp. However, Alphabet is 1.16 times more volatile than LendingClub Corp. It trades about 0.26 of its potential returns per unit of risk. LendingClub Corp is currently generating about -0.17 per unit of risk. If you would invest  15,226  in Alphabet Inc Class C on January 28, 2024 and sell it today you would earn a total of  2,143  from holding Alphabet Inc Class C or generate 14.07% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  LendingClub Corp

Alphabet Class C

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 7 (%) 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.

LendingClub Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LendingClub Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Alphabet and LendingClub Corp

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

The idea behind Alphabet Inc Class C and LendingClub Corp 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 CEOs Directory module to screen CEOs from public companies around the world.