Correlation Between Tandem Diabetes and Weibo Corp

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

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

Diversification Opportunities for Tandem Diabetes and Weibo Corp

0.68

Correlation Coefficient

Tandem Diabetes  Weibo Corp

Poor diversification

The 3 months correlation between Tandem and Weibo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and Weibo Corp go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Weibo Corp

Given the investment horizon of 90 days Tandem Diabetes is expected to generate 1.15 times less return on investment than Weibo Corp. In addition to that, Tandem Diabetes is 1.29 times more volatile than Weibo Corp. It trades about 0.03 of its total potential returns per unit of risk. Weibo Corp is currently generating about 0.05 per unit of volatility. If you would invest  763.00  in Weibo Corp on October 9, 2024 and sell it today you would earn a total of  165.00  from holding Weibo Corp or generate 21.63% return on investment over 90 days.

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

Tandem Diabetes Care  vs.  Weibo Corp

Tandem Diabetes Care

Risk-Adjusted Performance

0 of 100

Very Weak

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

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers 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 Tandem Diabetes and Weibo Corp

The main advantage of trading using opposite Tandem Diabetes and Weibo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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 Tandem Diabetes Care 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.