Correlation Between Shopify and Teladoc

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

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

Diversification Opportunities for Shopify and Teladoc

0.8

Correlation Coefficient

Shopify  Teladoc

Very poor diversification

The 3 months correlation between Shopify and Teladoc is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Teladoc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teladoc and Shopify 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 Shopify are associated (or correlated) with Teladoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teladoc has no effect on the direction of Shopify i.e., Shopify and Teladoc go up and down completely randomly.

Pair Corralation between Shopify and Teladoc

Assuming the 90 days horizon Shopify is expected to generate 0.93 times more return on investment than Teladoc. However, Shopify is 1.07 times less risky than Teladoc. It trades about 0.13 of its potential returns per unit of risk. Teladoc is currently generating about 0.03 per unit of risk. If you would invest  6,000  in Shopify on September 30, 2024 and sell it today you would earn a total of  4,384  from holding Shopify or generate 73.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Shopify  vs.  Teladoc

Shopify

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Teladoc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Teladoc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shopify and Teladoc

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

The idea behind Shopify and Teladoc 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 the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.