Correlation Between Alphabet and Moderna

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Can any of the company-specific risk be diversified away by investing in both Alphabet and Moderna 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 Moderna into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Cl A and Moderna, you can compare the effects of market volatilities on Alphabet and Moderna 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 Moderna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Moderna.

Diversification Opportunities for Alphabet and Moderna

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alphabet and Moderna is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Cl A and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Cl A are associated (or correlated) with Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Alphabet i.e., Alphabet and Moderna go up and down completely randomly.

Pair Corralation between Alphabet and Moderna

Assuming the 90 days horizon Alphabet Cl A is expected to under-perform the Moderna. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Cl A is 1.9 times less risky than Moderna. The stock trades about -0.24 of its potential returns per unit of risk. The Moderna is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  13,227  in Moderna on July 2, 2022 and sell it today you would lose (1,420)  from holding Moderna or give up 10.74% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alphabet Cl A  vs.  Moderna

 Performance (%) 
       Timeline  
Alphabet Cl A 
Alphabet Performance
0 of 100
Over the last 90 days Alphabet Cl A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in October 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Alphabet Price Channel

Moderna 
Moderna Performance
0 of 100
Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Moderna Price Channel

Alphabet and Moderna Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alphabet and Moderna

The main advantage of trading using opposite Alphabet and Moderna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Moderna 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 Moderna will offset losses from the drop in Moderna's long position.
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The idea behind Alphabet Cl A and Moderna 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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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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