Correlation Between Alphabet and EasyJet PLC

Can any of the company-specific risk be diversified away by investing in both Alphabet and EasyJet PLC 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 EasyJet PLC 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 EasyJet PLC, you can compare the effects of market volatilities on Alphabet and EasyJet PLC 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 EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and EasyJet PLC.

Diversification Opportunities for Alphabet and EasyJet PLC

0.82

Correlation Coefficient

Alphabet  EasyJet PLC

Very poor diversification

The 3 months correlation between Alphabet and EasyJet is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC 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 EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Alphabet i.e., Alphabet and EasyJet PLC go up and down completely randomly.

Pair Corralation between Alphabet and EasyJet PLC

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 2.79 times more return on investment than EasyJet PLC. However, Alphabet is 2.79 times more volatile than EasyJet PLC. It trades about 0.18 of its potential returns per unit of risk. EasyJet PLC is currently generating about -0.09 per unit of risk. If you would invest  17,589  in Alphabet Inc Class C on October 5, 2024 and sell it today you would earn a total of  1,474  from holding Alphabet Inc Class C or generate 8.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Alphabet Inc Class C  vs.  EasyJet PLC

Alphabet Class C

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

EasyJet PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EasyJet PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EasyJet PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and EasyJet PLC

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

The idea behind Alphabet Inc Class C and EasyJet PLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.