Correlation Between Twitter and Weibo Corp

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

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

Diversification Opportunities for Twitter and Weibo Corp

0.78
  Correlation Coefficient
Twitter
Weibo Corp ADR

Poor diversification

The 3 months correlation between Twitter and Weibo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Twitter and Weibo Corp ADR in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp ADR 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 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp ADR has no effect on the direction of Twitter i.e., Twitter and Weibo Corp go up and down completely randomly.

Pair Corralation between Twitter and Weibo Corp

Given the investment horizon of 90 days Twitter is expected to under-perform the Weibo Corp. But the stock apears to be less risky and, when comparing its historical volatility, Twitter is 1.96 times less risky than Weibo Corp. The stock trades about -0.57 of its potential returns per unit of risk. The Weibo Corp ADR is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  4,630  in Weibo Corp ADR on September 1, 2021 and sell it today you would lose (669.00)  from holding Weibo Corp ADR or give up 14.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Twitter  vs.  Weibo Corp ADR

 Performance (%) 
      Timeline 
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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2021. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Twitter Price Channel

Weibo Corp ADR 
Weibo Performance
0 of 100
Over the last 90 days Weibo Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2021. The current disturbance may also be a sign of long term up-swing for the company investors.

Weibo Price Channel

Twitter and Weibo Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Twitter and Weibo Corp

The main advantage of trading using opposite Twitter and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twitter position performs unexpectedly, Weibo Corp 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 Weibo Corp will offset losses from the drop in Weibo Corp's long position.
The idea behind Twitter and Weibo Corp ADR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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