Correlation Between IXE Select and Weibo Corp

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

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

Diversification Opportunities for IXE Select and Weibo Corp

0.2

Correlation Coefficient

IXE Select  Weibo Corp

Modest diversification

The 3 months correlation between IXE and Weibo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding IXE Select Sector and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp and IXE Select 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 IXE Select Sector 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 IXE Select i.e., IXE Select and Weibo Corp go up and down completely randomly.

Pair Corralation between IXE Select and Weibo Corp

Assuming the 90 days trading horizon IXE Select Sector is expected to under-perform the Weibo Corp. But the index apears to be less risky and, when comparing its historical volatility, IXE Select Sector is 3.44 times less risky than Weibo Corp. The index trades about 0.0 of its potential returns per unit of risk. The Weibo Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  751.00  in Weibo Corp on September 18, 2024 and sell it today you would earn a total of  285.00  from holding Weibo Corp or generate 37.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

IXE Select Sector  vs.  Weibo Corp

Pair Trading with IXE Select and Weibo Corp

The main advantage of trading using opposite IXE Select and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IXE Select 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 IXE Select Sector 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.