Correlation Between Alphabet and ECARX Holdings

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

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

Diversification Opportunities for Alphabet and ECARX Holdings

-0.32

Correlation Coefficient

Alphabet  ECARX Holdings

Very good diversification

The 3 months correlation between Alphabet and ECARX is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and ECARX Holdings Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Warrants 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 Class C are associated (or correlated) with ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Warrants has no effect on the direction of Alphabet i.e., Alphabet and ECARX Holdings go up and down completely randomly.

Pair Corralation between Alphabet and ECARX Holdings

Given the investment horizon of 90 days Alphabet is expected to generate 264.13 times less return on investment than ECARX Holdings. But when comparing it to its historical volatility, Alphabet Inc Class C is 123.36 times less risky than ECARX Holdings. It trades about 0.08 of its potential returns per unit of risk. ECARX Holdings Warrants is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1.56  in ECARX Holdings Warrants on September 3, 2024 and sell it today you would earn a total of  0.93  from holding ECARX Holdings Warrants or generate 59.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.88%
Values	Daily Returns

Alphabet Inc Class C  vs.  ECARX Holdings Warrants

Alphabet Class C

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ECARX Holdings Warrants

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days ECARX Holdings Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and ECARX Holdings

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

The idea behind Alphabet Inc Class C and ECARX Holdings Warrants 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.