Correlation Between Weibo Corp and Stratasys

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

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

Diversification Opportunities for Weibo Corp and Stratasys

0.7

Correlation Coefficient

Weibo Corp  Stratasys

Poor diversification

The 3 months correlation between Weibo and Stratasys is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Stratasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratasys and Weibo Corp 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 Weibo Corp are associated (or correlated) with Stratasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratasys has no effect on the direction of Weibo Corp i.e., Weibo Corp and Stratasys go up and down completely randomly.

Pair Corralation between Weibo Corp and Stratasys

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 19.94 times less return on investment than Stratasys. But when comparing it to its historical volatility, Weibo Corp is 1.38 times less risky than Stratasys. It trades about 0.01 of its potential returns per unit of risk. Stratasys is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  888.00  in Stratasys on December 28, 2024 and sell it today you would earn a total of  123.50  from holding Stratasys or generate 13.91% return on investment over 90 days.

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

Weibo Corp  vs.  Stratasys

Weibo Corp

Risk-Adjusted Performance

Insignificant

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Weibo Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stratasys

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weibo Corp and Stratasys

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

The idea behind Weibo Corp and Stratasys 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .