Correlation Between Eventbrite and China Index

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Can any of the company-specific risk be diversified away by investing in both Eventbrite and China Index 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 Eventbrite and China Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eventbrite Class A and China Index Holdings, you can compare the effects of market volatilities on Eventbrite and China Index 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 Eventbrite with a short position of China Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eventbrite and China Index.

Diversification Opportunities for Eventbrite and China Index

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Eventbrite and China is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eventbrite Class A and China Index Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Index Holdings and Eventbrite 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 Eventbrite Class A are associated (or correlated) with China Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Index Holdings has no effect on the direction of Eventbrite i.e., Eventbrite and China Index go up and down completely randomly.

Pair Corralation between Eventbrite and China Index

Allowing for the 90-day total investment horizon Eventbrite Class A is expected to under-perform the China Index. But the stock apears to be less risky and, when comparing its historical volatility, Eventbrite Class A is 1.51 times less risky than China Index. The stock trades about -0.03 of its potential returns per unit of risk. The China Index Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  105.00  in China Index Holdings on December 20, 2023 and sell it today you would lose (10.00) from holding China Index Holdings or give up 9.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy54.45%
ValuesDaily Returns

Eventbrite Class A  vs.  China Index Holdings

 Performance 
       Timeline  
Eventbrite Class A 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Eventbrite Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
China Index Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days China Index Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, China Index is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Eventbrite and China Index Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eventbrite and China Index

The main advantage of trading using opposite Eventbrite and China Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eventbrite position performs unexpectedly, China Index 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 China Index will offset losses from the drop in China Index's long position.
The idea behind Eventbrite Class A and China Index Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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