Correlation Between EverQuote and Weibo Corp

Can any of the company-specific risk be diversified away by investing in both EverQuote 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 EverQuote and Weibo Corp 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 Weibo Corp, you can compare the effects of market volatilities on EverQuote 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 EverQuote with a short position of Weibo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of EverQuote and Weibo Corp.

Diversification Opportunities for EverQuote and Weibo Corp

0.54

Correlation Coefficient

EverQuote  Weibo Corp

Very weak diversification

The 3 months correlation between EverQuote and Weibo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 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 EverQuote i.e., EverQuote and Weibo Corp go up and down completely randomly.

Pair Corralation between EverQuote and Weibo Corp

Given the investment horizon of 90 days EverQuote Class A is expected to generate 2.05 times more return on investment than Weibo Corp. However, EverQuote is 2.05 times more volatile than Weibo Corp. It trades about 0.2 of its potential returns per unit of risk. Weibo Corp is currently generating about 0.09 per unit of risk. If you would invest  2,035  in EverQuote Class A on November 29, 2024 and sell it today you would earn a total of  527.00  from holding EverQuote Class A or generate 25.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

EverQuote Class A  vs.  Weibo Corp

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.

Weibo Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EverQuote and Weibo Corp

The main advantage of trading using opposite EverQuote and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EverQuote 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 EverQuote Class A 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.