Correlation Between Twitter and Weibo

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

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

Diversification Opportunities for Twitter and Weibo

  Correlation Coefficient

Very good diversification

The 3 months correlation between Twitter and Weibo is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Twitter Inc and Weibo Corp. in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Weibo and Twitter 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 Twitter are associated (or correlated) with Weibo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo has no effect on the direction of Twitter i.e. Twitter and Weibo go up and down completely randomly.

Pair Corralation between Twitter and Weibo

Given the investment horizon of 30 days, Twitter is expected to generate 1.22 times more return on investment than Weibo. However, Twitter is 1.22 times more volatile than Weibo. It trades about 0.11 of its potential returns per unit of risk. Weibo is currently generating about 0.01 per unit of risk. If you would invest  2,493  in Twitter on June 5, 2020 and sell it today you would earn a total of  594.00  from holding Twitter or generate 23.83% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Twitter Inc  vs.  Weibo Corp.

 Performance (%) 

Twitter Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Twitter are ranked lower than 7 (%) of all global equities and portfolios over the last 30 days. In defiance of relatively weak forward-looking signals, Twitter reported solid returns over the last few months and may actually be approaching a breakup point.

Weibo Risk-Adjusted Performance

Over the last 30 days Weibo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Weibo is not utilizing all of its potentials. The last stock price disturbance, may contribute to short term losses for the investors.

Twitter and Weibo Volatility Contrast

 Predicted Return Density 
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