Correlation Between Weibo Corp and Tandem Diabetes

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

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

Diversification Opportunities for Weibo Corp and Tandem Diabetes

0.68

Correlation Coefficient

Weibo Corp  Tandem Diabetes

Poor diversification

The 3 months correlation between Weibo and Tandem is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and Tandem Diabetes Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandem Diabetes Care 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 Tandem Diabetes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandem Diabetes Care has no effect on the direction of Weibo Corp i.e., Weibo Corp and Tandem Diabetes go up and down completely randomly.

Pair Corralation between Weibo Corp and Tandem Diabetes

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 0.78 times more return on investment than Tandem Diabetes. However, Weibo Corp is 1.29 times less risky than Tandem Diabetes. It trades about 0.05 of its potential returns per unit of risk. Tandem Diabetes Care is currently generating about 0.03 per unit of risk. 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

Weibo Corp  vs.  Tandem Diabetes Care

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.

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.

Pair Trading with Weibo Corp and Tandem Diabetes

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

The idea behind Weibo Corp and Tandem Diabetes Care 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.