Correlation Between Airbnb and Alphabet
Can any of the company-specific risk be diversified away by investing in both Airbnb 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 Airbnb and Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Airbnb Inc and Alphabet, you can compare the effects of market volatilities on Airbnb 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 Airbnb with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbnb and Alphabet.
Diversification Opportunities for Airbnb and Alphabet
Very poor diversification
The 3 months correlation between Airbnb and Alphabet is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Airbnb Inc and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet and Airbnb 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 Airbnb 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 has no effect on the direction of Airbnb i.e., Airbnb and Alphabet go up and down completely randomly.
Pair Corralation between Airbnb and Alphabet
Assuming the 90 days trading horizon Airbnb Inc is expected to generate 1.89 times more return on investment than Alphabet. However, Airbnb is 1.89 times more volatile than Alphabet. It trades about 0.07 of its potential returns per unit of risk. Alphabet is currently generating about 0.04 per unit of risk. If you would invest 3,821 in Airbnb Inc on August 26, 2024 and sell it today you would earn a total of 169.00 from holding Airbnb Inc or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Airbnb Inc vs. Alphabet
Performance |
| Timeline |
| Airbnb Inc |
| Alphabet |
Airbnb and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Airbnb and Alphabet
The main advantage of trading using opposite Airbnb and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airbnb 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.The idea behind Airbnb Inc and Alphabet 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. Paycom Software | Alphabet vs. Technos SA | Alphabet vs. BIONTECH SE DRN | Alphabet vs. GP Investments |
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 the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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