Correlation Between MediaAlpha and Twilio

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

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

Diversification Opportunities for MediaAlpha and Twilio

0.65

Correlation Coefficient

MediaAlpha  Twilio

Poor diversification

The 3 months correlation between MediaAlpha and Twilio is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MediaAlpha and Twilio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twilio Inc and MediaAlpha 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 MediaAlpha are associated (or correlated) with Twilio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twilio Inc has no effect on the direction of MediaAlpha i.e., MediaAlpha and Twilio go up and down completely randomly.

Pair Corralation between MediaAlpha and Twilio

Considering the 90-day investment horizon MediaAlpha is expected to under-perform the Twilio. But the stock apears to be less risky and, when comparing its historical volatility, MediaAlpha is 1.02 times less risky than Twilio. The stock trades about -0.05 of its potential returns per unit of risk. The Twilio Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  10,862  in Twilio Inc on December 30, 2024 and sell it today you would lose (964.00) from holding Twilio Inc or give up 8.87% of portfolio value over 90 days.

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

MediaAlpha  vs.  Twilio Inc

MediaAlpha

Risk-Adjusted Performance

Very Weak

Over the last 90 days MediaAlpha has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Twilio Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Twilio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Twilio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MediaAlpha and Twilio

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

The idea behind MediaAlpha and Twilio 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.