Correlation Between News Corp and Twitter

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

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

Diversification Opportunities for News Corp and Twitter

0.0

Correlation Coefficient

News Corp  Twitter

Pay attention - limited upside

The 3 months correlation between News and Twitter is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding News Corp A and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter and News Corp 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 News Corp A are associated (or correlated) with Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of News Corp i.e., News Corp and Twitter go up and down completely randomly.

Pair Corralation between News Corp and Twitter

Given the investment horizon of 90 days News Corp is expected to generate 2.35 times less return on investment than Twitter. But when comparing it to its historical volatility, News Corp A is 1.78 times less risky than Twitter. It trades about 0.03 of its potential returns per unit of risk. Twitter is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,906  in Twitter on January 24, 2024 and sell it today you would earn a total of  464.00  from holding Twitter or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	25.05%
Values	Daily Returns

News Corp A  vs.  Twitter

News Corp A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days News Corp A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, News Corp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Twitter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Twitter has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Twitter is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with News Corp and Twitter

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

The idea behind News Corp A and Twitter 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .