Correlation Between Weibo Corp and UNITED

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

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

Diversification Opportunities for Weibo Corp and UNITED

-0.02

Correlation Coefficient

Weibo Corp  UNITED

Good diversification

The 3 months correlation between Weibo and UNITED is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and UNITED NAT FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED NAT FOODS 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 UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED NAT FOODS has no effect on the direction of Weibo Corp i.e., Weibo Corp and UNITED go up and down completely randomly.

Pair Corralation between Weibo Corp and UNITED

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 5.86 times more return on investment than UNITED. However, Weibo Corp is 5.86 times more volatile than UNITED NAT FOODS. It trades about 0.0 of its potential returns per unit of risk. UNITED NAT FOODS is currently generating about -0.1 per unit of risk. If you would invest  954.00  in Weibo Corp on December 30, 2024 and sell it today you would lose (15.00) from holding Weibo Corp or give up 1.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Weibo Corp  vs.  UNITED NAT FOODS

Weibo Corp

Risk-Adjusted Performance

Very Weak

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.

UNITED NAT FOODS

Risk-Adjusted Performance

Very Weak

Over the last 90 days UNITED NAT FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITED is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Weibo Corp and UNITED

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

The idea behind Weibo Corp and UNITED NAT FOODS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.