Alphabet Stock risk analysis - GOOG | Macroaxis (2024)

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Since volatility provides investors with entry points to take advantage of stock prices, companies, such as Alphabet can benefit from it. Downward market volatility can be a perfect environment for investors who play the long game as hey may decide to buy additional stocks of Alphabet at lower prices to lower their average cost per share. Similarly, when the prices of Alphabet's stock rise, investors can sell out and invest the proceeds in other equities with better opportunities.

Moving together with Alphabet Stock

Moving against Alphabet Stock

Alphabet Market Sensitivity And Downside Risk

Alphabet's beta coefficient measures the volatility of Alphabet stock compared to the systematic risk of the entire market represented by your selected benchmark. In mathematical terms, beta represents the slope of the line through a regression of data points where each of these points represents Alphabet stock's returns against your selected market. In other words, Alphabet's beta of 1.03 provides an investor with an approximation of how much risk Alphabet stock can potentially add to one of your existing portfolios. Alphabet Inc Class C exhibits very low volatility with skewness of -0.9 and kurtosis of 0.77. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Alphabet's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Alphabet's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different financial instruments as prices fall.

3 Months Beta |Analyze Alphabet Class C Demand Trend

Check current 90 days Alphabet correlation with market (Dow Jones Industrial)

Alphabet standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. A typical volatile entity has a high standard deviation, while the deviation of a stable instrument is usually low. As a downside, the standard deviation calculates all uncertainty as risk, even when it is in your favor, such as above-average returns.

It is essential to understand the difference between upside risk (as represented by Alphabet's standard deviation) and the downside risk, which can be measured by semi-deviation or downside deviation of Alphabet's daily returns or price. Since the actual investment returns on holding a position in alphabet stock tend to have a non-normal distribution, there will be different probabilities for losses than for gains. The likelihood of losses is reflected in the downside risk of an investment in Alphabet.

Using Alphabet Put Option to Manage Risk

Put options written on Alphabet grant holders of the option the right to sell a specified amount of Alphabet at a specified price within a specified time frame. The put buyer has a limited loss and, while not fully unlimited gains, as the price of Alphabet Stock cannot fall below zero, the put buyer does gain as the price drops. So, one way investors can hedge Alphabet's position is by buying a put option against it. The put option used this way is usually referred to as insurance. If an undesired outcome occurs and loss on holding Alphabet will be realized, the loss incurred will be offset by the profits made with the option trade.

Alphabet's PUT expiring on 2024-09-20

Alphabet Class C Stock Volatility Analysis

Alphabet Projected Return Density Against Market

Given the investment horizon of 90 days the stock has the beta coefficient of 1.0308 . This usually indicates Alphabet Inc Class C market returns are reactive to returns on the market. As the market goes up or down, Alphabet is expected to follow.

Most traded equities are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Alphabet or Interactive Media & Services sector will adversely affect the stock's price. This type of risk can be diversified away by owning several different stocks in different industries whose stock prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Alphabet's price will be affected by overall stock market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Alphabet stock's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.

Alphabet Inc Class C has a negative alpha, implying that the risk taken by holding this instrument is not justified. The company is significantly underperforming the Dow Jones Industrial.

Alphabet's volatility is measured either by using standard deviation or beta. Standard deviation will reflect the average amount of how alphabet stock's price will differ from the mean after some time.To get its calculation, you should first determine the mean price during the specified period then subtract that from each price point.

What Drives an Alphabet Price Volatility?

Several factors can influence a stock's market volatility:

Industry

Specific events can influence volatility within a particular industry. For instance, a significant weather upheaval in a crucial oil-production site may cause oil prices to increase in the oil sector. The direct result will be the rise in the stock price of oil distribution companies. Similarly, any government regulation in a specific industry could negatively influence stock prices due to increased regulations on compliance that may impact the company's future earnings and growth.

Political and Economic environment

When governments make significant decisions regarding trade agreements, policies, and legislation regarding specific industries, they will influence stock prices. Everything from speeches to elections may influence investors, who can directly influence the stock prices in any particular industry. The prevailing economic situation also plays a significant role in stock prices. When the economy is doing well, investors will have a positive reaction and hence, better stock prices and vice versa.

The Company's Performance

Sometimes volatility will only affect an individual company. For example, a revolutionary product launch or strong earnings report may attract many investors to purchase the company. This positive attention will raise the company's stock price. In contrast, product recalls and data breaches may negatively influence a company's stock prices.

Alphabet Stock Risk Measures

Given the investment horizon of 90 days the coefficient of variation of Alphabet is -962.57. The daily returns are distributed with a variance of 2.95 and standard deviation of 1.72. The mean deviation of Alphabet Inc Class C is currently at 1.33. For similar time horizon, the selected benchmark (Dow Jones Industrial) has volatility of 0.8

Alphabet Stock Return Volatility

Alphabet historical daily return volatility represents how much of Alphabet stock's daily returns swing around its mean - it is a statistical measure of its dispersion of returns. The company inherits 1.7187% risk (volatility on return distribution) over the 90 days horizon. By contrast, Dow Jones Industrial accepts 0.8191% volatility on return distribution over the 90 days horizon.