Correlation Between Tradeweb Markets and Big Yellow

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

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

Diversification Opportunities for Tradeweb Markets and Big Yellow

-0.4

Correlation Coefficient

Tradeweb Markets  Big Yellow

Very good diversification

The 3 months correlation between Tradeweb and Big is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tradeweb Markets and Big Yellow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Yellow Group and Tradeweb Markets 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 Tradeweb Markets are associated (or correlated) with Big Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Yellow Group has no effect on the direction of Tradeweb Markets i.e., Tradeweb Markets and Big Yellow go up and down completely randomly.

Pair Corralation between Tradeweb Markets and Big Yellow

Assuming the 90 days horizon Tradeweb Markets is expected to generate 1.3 times more return on investment than Big Yellow. However, Tradeweb Markets is 1.3 times more volatile than Big Yellow Group. It trades about 0.1 of its potential returns per unit of risk. Big Yellow Group is currently generating about 0.02 per unit of risk. If you would invest  6,486  in Tradeweb Markets on October 4, 2024 and sell it today you would earn a total of  6,414  from holding Tradeweb Markets or generate 98.89% return on investment over 90 days.

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

Tradeweb Markets  vs.  Big Yellow Group

Tradeweb Markets

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tradeweb Markets reported solid returns over the last few months and may actually be approaching a breakup point.

Big Yellow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Yellow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big Yellow is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tradeweb Markets and Big Yellow

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

The idea behind Tradeweb Markets and Big Yellow Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.