Correlation Between Stem and Alphabet

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Stem and Alphabet 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 Stem and Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stem Inc and Alphabet Cl A, you can compare the effects of market volatilities on Stem and Alphabet 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 Stem with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Alphabet.

Diversification Opportunities for Stem and Alphabet

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Stem and Alphabet is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Alphabet Cl A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Cl A and Stem 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 Stem Inc are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Cl A has no effect on the direction of Stem i.e., Stem and Alphabet go up and down completely randomly.

Pair Corralation between Stem and Alphabet

Given the investment horizon of 90 days Stem Inc is expected to generate 3.58 times more return on investment than Alphabet. However, Stem is 3.58 times more volatile than Alphabet Cl A. It trades about 0.04 of its potential returns per unit of risk. Alphabet Cl A is currently generating about 0.04 per unit of risk. If you would invest  976.00  in Stem Inc on July 1, 2022 and sell it today you would earn a total of  319.00  from holding Stem Inc or generate 32.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Stem Inc  vs.  Alphabet Cl A

 Performance (%) 
       Timeline  
Stem Inc 
Stem Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Stem Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Stem revealed solid returns over the last few months and may actually be approaching a breakup point.

Stem Price Channel

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 latest unsteady performance, the Stock's technical and fundamental indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Alphabet Price Channel

Stem and Alphabet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Stem and Alphabet

The main advantage of trading using opposite Stem and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.
Stem vs. Microsoft Corp
The idea behind Stem Inc and Alphabet Cl A 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.
Alphabet vs. Tencent Holdings
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

Other Complementary Tools

Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Go
ETF Directory
Find actively traded Exchange Traded Funds (ETF) from around the world
Go
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Price Transformation
Use Price Transformation models to analyze depth of different equity instruments across global markets
Go
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Bond Directory
Find actively traded corporate debentures issued by US companies
Go
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Go
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Go
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go