Correlation Between EverQuote and Snap

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

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

Diversification Opportunities for EverQuote and Snap

-0.36

Correlation Coefficient

EverQuote  Snap

Very good diversification

The 3 months correlation between EverQuote and Snap is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and Snap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap Inc and EverQuote 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 EverQuote Class A are associated (or correlated) with Snap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap Inc has no effect on the direction of EverQuote i.e., EverQuote and Snap go up and down completely randomly.

Pair Corralation between EverQuote and Snap

Given the investment horizon of 90 days EverQuote Class A is expected to generate 1.66 times more return on investment than Snap. However, EverQuote is 1.66 times more volatile than Snap Inc. It trades about 0.12 of its potential returns per unit of risk. Snap Inc is currently generating about -0.06 per unit of risk. If you would invest  1,919  in EverQuote Class A on November 28, 2024 and sell it today you would earn a total of  643.00  from holding EverQuote Class A or generate 33.51% return on investment over 90 days.

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

EverQuote Class A  vs.  Snap Inc

EverQuote Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EverQuote Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EverQuote reported solid returns over the last few months and may actually be approaching a breakup point.

Snap Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Snap Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with EverQuote and Snap

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

The idea behind EverQuote Class A and Snap Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.