Correlation Between EasyJet PLC and Alphabet

Can any of the company-specific risk be diversified away by investing in both EasyJet PLC 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 EasyJet PLC and Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EasyJet PLC and Alphabet Class A, you can compare the effects of market volatilities on EasyJet PLC 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 EasyJet PLC with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of EasyJet PLC and Alphabet.

Diversification Opportunities for EasyJet PLC and Alphabet

0.54

Correlation Coefficient

EasyJet PLC  Alphabet

Very weak diversification

The 3 months correlation between EasyJet and Alphabet is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EasyJet PLC and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A and EasyJet PLC 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 EasyJet PLC 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 Class A has no effect on the direction of EasyJet PLC i.e., EasyJet PLC and Alphabet go up and down completely randomly.

Pair Corralation between EasyJet PLC and Alphabet

Assuming the 90 days trading horizon EasyJet PLC is expected to generate 4.7 times less return on investment than Alphabet. In addition to that, EasyJet PLC is 1.08 times more volatile than Alphabet Class A. It trades about 0.01 of its total potential returns per unit of risk. Alphabet Class A is currently generating about 0.07 per unit of volatility. If you would invest  12,231  in Alphabet Class A on October 12, 2024 and sell it today you would earn a total of  7,244  from holding Alphabet Class A or generate 59.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.75%
Values	Daily Returns

EasyJet PLC  vs.  Alphabet Class A

EasyJet PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EasyJet PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, EasyJet PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Alphabet Class A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alphabet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EasyJet PLC and Alphabet

The main advantage of trading using opposite EasyJet PLC and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EasyJet PLC 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 EasyJet PLC and Alphabet Class 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.