Correlation Between Alphabet and LightInTheBox Holding

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

Diversification Opportunities for Alphabet and LightInTheBox Holding

0.04

Correlation Coefficient

Alphabet  LightInTheBox Holding

Significant diversification

The 3 months correlation between Alphabet and LightInTheBox is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and LightInTheBox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightInTheBox Holding 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 LightInTheBox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightInTheBox Holding has no effect on the direction of Alphabet i.e., Alphabet and LightInTheBox Holding go up and down completely randomly.

Pair Corralation between Alphabet and LightInTheBox Holding

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.37 times more return on investment than LightInTheBox Holding. However, Alphabet Inc Class C is 2.74 times less risky than LightInTheBox Holding. It trades about 0.03 of its potential returns per unit of risk. LightInTheBox Holding Co is currently generating about -0.15 per unit of risk. If you would invest  17,030  in Alphabet Inc Class C on November 28, 2024 and sell it today you would earn a total of  511.00  from holding Alphabet Inc Class C or generate 3.0% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  LightInTheBox Holding Co

Alphabet Class C

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

LightInTheBox Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days LightInTheBox Holding Co 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 somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alphabet and LightInTheBox Holding

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

The idea behind Alphabet Inc Class C and LightInTheBox Holding Co 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.