Correlation Between Ambarella and Alpha

Can any of the company-specific risk be diversified away by investing in both Ambarella and Alpha 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 Ambarella and Alpha into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ambarella and Alpha and Omega, you can compare the effects of market volatilities on Ambarella and Alpha 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 Ambarella with a short position of Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambarella and Alpha.

Diversification Opportunities for Ambarella and Alpha

0.69

Correlation Coefficient

Ambarella  Alpha

Poor diversification

The 3 months correlation between Ambarella and Alpha is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ambarella and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and Ambarella 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 Ambarella are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Ambarella i.e., Ambarella and Alpha go up and down completely randomly.

Pair Corralation between Ambarella and Alpha

Given the investment horizon of 90 days Ambarella is expected to generate 1.26 times more return on investment than Alpha. However, Ambarella is 1.26 times more volatile than Alpha and Omega. It trades about 0.11 of its potential returns per unit of risk. Alpha and Omega is currently generating about 0.13 per unit of risk. If you would invest  5,014  in Ambarella on May 3, 2025 and sell it today you would earn a total of  1,319  from holding Ambarella or generate 26.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Ambarella  vs.  Alpha and Omega

Ambarella

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Ambarella sustained solid returns over the last few months and may actually be approaching a breakup point.

Alpha and Omega

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambarella and Alpha

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

The idea behind Ambarella and Alpha and Omega 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.