Correlation Between Alphabet and Exro Technologies

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

By analyzing existing cross correlation between Alphabet Inc CDR and Exro Technologies, you can compare the effects of market volatilities on Alphabet and Exro Technologies 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 Exro Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Exro Technologies.

Diversification Opportunities for Alphabet and Exro Technologies

-0.4

Correlation Coefficient

Alphabet  Exro Technologies

Very good diversification

The 3 months correlation between Alphabet and Exro is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies 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 Inc CDR are associated (or correlated) with Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of Alphabet i.e., Alphabet and Exro Technologies go up and down completely randomly.

Pair Corralation between Alphabet and Exro Technologies

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to generate 0.19 times more return on investment than Exro Technologies. However, Alphabet Inc CDR is 5.31 times less risky than Exro Technologies. It trades about 0.18 of its potential returns per unit of risk. Exro Technologies is currently generating about -0.04 per unit of risk. If you would invest  2,714  in Alphabet Inc CDR on October 9, 2024 and sell it today you would earn a total of  571.00  from holding Alphabet Inc CDR or generate 21.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc CDR  vs.  Exro Technologies

Alphabet CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Alphabet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Exro Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exro Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Alphabet and Exro Technologies

The main advantage of trading using opposite Alphabet and Exro Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Exro Technologies 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 Exro Technologies will offset losses from the drop in Exro Technologies' long position.

The idea behind Alphabet Inc CDR and Exro Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.