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

0.14

Correlation Coefficient

Alphabet  Airbnb

Average diversification

The 3 months correlation between Alphabet and Airbnb is 0.14. 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

If you would invest  2,731  in Airbnb Inc on October 12, 2024 and sell it today you would earn a total of  1,193  from holding Airbnb Inc or generate 43.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.2%
Values	Daily Returns

Alphabet  vs.  Airbnb Inc

Alphabet

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Alphabet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak technical and fundamental indicators, Alphabet sustained solid returns over the last few months and may actually be approaching a breakup point.

Airbnb Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Airbnb Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Airbnb may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

The idea behind Alphabet and Airbnb Inc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.