Correlation Between Under Armour and EBay

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

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

Diversification Opportunities for Under Armour and EBay

-0.46

Correlation Coefficient

Under Armour  EBay

Very good diversification

The 3 months correlation between Under and EBay is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and Under Armour 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 Under Armour C are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Under Armour i.e., Under Armour and EBay go up and down completely randomly.

Pair Corralation between Under Armour and EBay

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the EBay. In addition to that, Under Armour is 1.33 times more volatile than eBay Inc. It trades about -0.15 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.13 per unit of volatility. If you would invest  4,865  in eBay Inc on March 3, 2024 and sell it today you would earn a total of  557.00  from holding eBay Inc or generate 11.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Under Armour C  vs.  eBay Inc

Under Armour C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

eBay Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Under Armour and EBay

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

The idea behind Under Armour C and eBay Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.