Correlation Between Shopify and Whitbread PLC

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

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

Diversification Opportunities for Shopify and Whitbread PLC

-0.88

Correlation Coefficient

Shopify  Whitbread PLC

Pay attention - limited upside

The 3 months correlation between Shopify and Whitbread is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Whitbread PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitbread PLC ADR and Shopify 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 Shopify are associated (or correlated) with Whitbread PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitbread PLC ADR has no effect on the direction of Shopify i.e., Shopify and Whitbread PLC go up and down completely randomly.

Pair Corralation between Shopify and Whitbread PLC

Given the investment horizon of 90 days Shopify is expected to generate 1.66 times more return on investment than Whitbread PLC. However, Shopify is 1.66 times more volatile than Whitbread PLC ADR. It trades about 0.0 of its potential returns per unit of risk. Whitbread PLC ADR is currently generating about -0.03 per unit of risk. If you would invest  11,529  in Shopify on October 9, 2024 and sell it today you would lose (105.00) from holding Shopify or give up 0.91% of portfolio value over 90 days.

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

Shopify  vs.  Whitbread PLC ADR

Shopify

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Whitbread PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shopify and Whitbread PLC

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

The idea behind Shopify and Whitbread PLC ADR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.