Correlation Between EBay and AeroVironment
Can any of the company-specific risk be diversified away by investing in both EBay and AeroVironment 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 EBay and AeroVironment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between eBay Inc and AeroVironment, you can compare the effects of market volatilities on EBay and AeroVironment 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 EBay with a short position of AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and AeroVironment.
Diversification Opportunities for EBay and AeroVironment
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EBay and AeroVironment is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment and EBay 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 eBay Inc are associated (or correlated) with AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of EBay i.e., EBay and AeroVironment go up and down completely randomly.
Pair Corralation between EBay and AeroVironment
Assuming the 90 days trading horizon EBay is expected to generate 3.64 times less return on investment than AeroVironment. In addition to that, EBay is 1.75 times more volatile than AeroVironment. It trades about 0.06 of its total potential returns per unit of risk. AeroVironment is currently generating about 0.38 per unit of volatility. If you would invest 15,000 in AeroVironment on October 25, 2024 and sell it today you would earn a total of 1,820 from holding AeroVironment or generate 12.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
eBay Inc vs. AeroVironment
Performance |
Timeline |
eBay Inc |
AeroVironment |
EBay and AeroVironment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EBay and AeroVironment
The main advantage of trading using opposite EBay and AeroVironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay position performs unexpectedly, AeroVironment 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 AeroVironment will offset losses from the drop in AeroVironment's long position.EBay vs. X FAB Silicon Foundries | EBay vs. Cognizant Technology Solutions | EBay vs. NORTHEAST UTILITIES | EBay vs. Sunny Optical Technology |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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