Correlation Between Ebara and Weibo Corp

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

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

Diversification Opportunities for Ebara and Weibo Corp

0.0

Correlation Coefficient

Ebara  Weibo Corp

Pay attention - limited upside

The 3 months correlation between Ebara and Weibo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ebara and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp and Ebara 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 Ebara are associated (or correlated) with Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Ebara i.e., Ebara and Weibo Corp go up and down completely randomly.

Pair Corralation between Ebara and Weibo Corp

Assuming the 90 days horizon Ebara is expected to generate 18.88 times more return on investment than Weibo Corp. However, Ebara is 18.88 times more volatile than Weibo Corp. It trades about 0.11 of its potential returns per unit of risk. Weibo Corp is currently generating about 0.01 per unit of risk. If you would invest  3,530  in Ebara on September 28, 2024 and sell it today you would lose (2,330) from holding Ebara or give up 66.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	64.89%
Values	Daily Returns

Ebara  vs.  Weibo Corp

Ebara

Risk-Adjusted Performance

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Very Weak

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

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Weibo Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ebara and Weibo Corp

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

The idea behind Ebara and Weibo Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.