Correlation Between Sohu Inc and Twitter

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

Diversification Opportunities for Sohu Inc and Twitter

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Sohu Inc and Twitter is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sohu Inc ADR and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter and Sohu Inc 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 Sohu Inc ADR 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 Sohu Inc i.e., Sohu Inc and Twitter go up and down completely randomly.

Pair Corralation between Sohu Inc and Twitter

Given the investment horizon of 90 days Sohu Inc ADR is expected to generate 1.24 times more return on investment than Twitter. However, Sohu Inc is 1.24 times more volatile than Twitter. It trades about 0.01 of its potential returns per unit of risk. Twitter is currently generating about -0.04 per unit of risk. If you would invest  1,702  in Sohu Inc ADR on March 31, 2022 and sell it today you would lose (96.00)  from holding Sohu Inc ADR or give up 5.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sohu Inc ADR  vs.  Twitter

 Performance (%) 
      Timeline 
Sohu Inc ADR 
Sohu Inc Performance
0 of 100
Over the last 90 days Sohu Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Sohu Inc is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Sohu Inc Price Channel

Twitter 
Twitter Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Twitter are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Twitter may actually be approaching a critical reversion point that can send shares even higher in July 2022.

Twitter Price Channel

Sohu Inc and Twitter Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Sohu Inc and Twitter

The main advantage of trading using opposite Sohu Inc and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sohu Inc 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 Sohu Inc ADR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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