Correlation Between Alphabet and Eros International

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

Diversification Opportunities for Alphabet and Eros International

-0.37

Correlation Coefficient

Alphabet  Eros International

Very good diversification

The 3 months correlation between Alphabet and Eros is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Eros International Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros International Media 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 Eros International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros International Media has no effect on the direction of Alphabet i.e., Alphabet and Eros International go up and down completely randomly.

Pair Corralation between Alphabet and Eros International

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.51 times more return on investment than Eros International. However, Alphabet Inc Class C is 1.95 times less risky than Eros International. It trades about 0.09 of its potential returns per unit of risk. Eros International Media is currently generating about -0.06 per unit of risk. If you would invest  15,840  in Alphabet Inc Class C on August 31, 2024 and sell it today you would earn a total of  1,242  from holding Alphabet Inc Class C or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Alphabet Inc Class C  vs.  Eros International Media

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 December 2024.

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Alphabet and Eros International

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

The idea behind Alphabet Inc Class C and Eros International Media 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.