Correlation Between Alphabet and Joby Aviation

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

Diversification Opportunities for Alphabet and Joby Aviation

0.85

Correlation Coefficient

Alphabet  Joby Aviation

Very poor diversification

The 3 months correlation between Alphabet and Joby is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Joby Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joby Aviation 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 Joby Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joby Aviation has no effect on the direction of Alphabet i.e., Alphabet and Joby Aviation go up and down completely randomly.

Pair Corralation between Alphabet and Joby Aviation

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.41 times more return on investment than Joby Aviation. However, Alphabet Inc Class C is 2.44 times less risky than Joby Aviation. It trades about -0.12 of its potential returns per unit of risk. Joby Aviation is currently generating about -0.09 per unit of risk. If you would invest  19,247  in Alphabet Inc Class C on December 29, 2024 and sell it today you would lose (2,839) from holding Alphabet Inc Class C or give up 14.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  Joby Aviation

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 conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Joby Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Joby Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alphabet and Joby Aviation

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

The idea behind Alphabet Inc Class C and Joby Aviation 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.