Correlation Between Sirius XM and Twitter

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

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

Diversification Opportunities for Sirius XM and Twitter

0.83
  Correlation Coefficient
Sirius XM Holdings
Twitter

Very poor diversification

The 3 months correlation between Sirius and Twitter is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sirius XM Holdings and Twitter in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Twitter and Sirius XM 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 Sirius XM Holdings 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 Sirius XM i.e., Sirius XM and Twitter go up and down completely randomly.

Pair Corralation between Sirius XM and Twitter

Given the investment horizon of 90 days Sirius XM Holdings is expected to under-perform the Twitter. But the stock apears to be less risky and, when comparing its historical volatility, Sirius XM Holdings is 2.17 times less risky than Twitter. The stock trades about -0.24 of its potential returns per unit of risk. The Twitter is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,343  in Twitter on June 28, 2021 and sell it today you would earn a total of  82.00  from holding Twitter or generate 1.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sirius XM Holdings  vs.  Twitter

 Performance (%) 
      Timeline 
Sirius XM Holdings 
 Sirius Performance
0 of 100
Over the last 90 days Sirius XM Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sirius Price Channel

Twitter 
 Twitter Performance
0 of 100
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 current stock price agitation, may contribute to short-term losses for the retail investors.

Twitter Price Channel

Sirius XM and Twitter Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Sirius XM and Twitter

The main advantage of trading using opposite Sirius XM and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sirius XM 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 Sirius XM Holdings 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.
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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