Correlation Between Weibo Corp and Twitter

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

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

Diversification Opportunities for Weibo Corp and Twitter

0.85
  Correlation Coefficient
Weibo Corp ADR
Twitter

Very poor diversification

The 3 months correlation between Weibo and Twitter is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp ADR and Twitter in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Twitter and Weibo Corp 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and Twitter go up and down completely randomly.

Pair Corralation between Weibo Corp and Twitter

Allowing for the 90-day total investment horizon Weibo Corp ADR is expected to generate 1.2 times more return on investment than Twitter. However, Weibo Corp is 1.2 times more volatile than Twitter. It trades about -0.19 of its potential returns per unit of risk. Twitter is currently generating about -0.27 per unit of risk. If you would invest  4,538  in Weibo Corp ADR on September 4, 2021 and sell it today you would lose (1,102)  from holding Weibo Corp ADR or give up 24.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Weibo Corp ADR  vs.  Twitter

 Performance (%) 
      Timeline 
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 January 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Weibo 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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Twitter Price Channel

Weibo Corp and Twitter Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Weibo Corp and Twitter

The main advantage of trading using opposite Weibo Corp and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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