Correlation Between Alphabet and Airbnb
Can any of the company-specific risk be diversified away by investing in both Alphabet and Airbnb 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 Airbnb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet and Airbnb Inc, you can compare the effects of market volatilities on Alphabet and Airbnb 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 Airbnb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Airbnb.
Diversification Opportunities for Alphabet and Airbnb
Poor diversification
The 3 months correlation between Alphabet and Airbnb is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet and Airbnb Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbnb Inc 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 are associated (or correlated) with Airbnb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbnb Inc has no effect on the direction of Alphabet i.e., Alphabet and Airbnb go up and down completely randomly.
Pair Corralation between Alphabet and Airbnb
Assuming the 90 days trading horizon Alphabet is expected to generate 3.4 times less return on investment than Airbnb. But when comparing it to its historical volatility, Alphabet is 2.01 times less risky than Airbnb. It trades about 0.04 of its potential returns per unit of risk. Airbnb Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alphabet vs. Airbnb Inc
Performance |
| Timeline |
| Alphabet |
| Airbnb Inc |
Alphabet and Airbnb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Airbnb
The main advantage of trading using opposite Alphabet and Airbnb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Airbnb 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 Airbnb will offset losses from the drop in Airbnb's long position.| Alphabet vs. United Rentals | Alphabet vs. CVS Health | Alphabet vs. Uber Technologies | Alphabet vs. Raytheon Technologies |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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