Correlation Between Alphabet and Ideanomics

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

Diversification Opportunities for Alphabet and Ideanomics

-0.2

Correlation Coefficient

Alphabet  Ideanomics

Good diversification

The 3 months correlation between Alphabet and Ideanomics is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Alphabet i.e., Alphabet and Ideanomics go up and down completely randomly.

Pair Corralation between Alphabet and Ideanomics

Given the investment horizon of 90 days Alphabet is expected to generate 3826.97 times less return on investment than Ideanomics. But when comparing it to its historical volatility, Alphabet Inc Class C is 128.06 times less risky than Ideanomics. It trades about 0.01 of its potential returns per unit of risk. Ideanomics is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Ideanomics on December 5, 2024 and sell it today you would lose (1.50) from holding Ideanomics or give up 21.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.67%
Values	Daily Returns

Alphabet Inc Class C  vs.  Ideanomics

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ideanomics

Risk-Adjusted Performance

Strong

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

Pair Trading with Alphabet and Ideanomics

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

The idea behind Alphabet Inc Class C and Ideanomics 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.