Correlation Between EBay and Best Buy

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

By analyzing existing cross correlation between eBay Inc and Best Buy Co, you can compare the effects of market volatilities on EBay and Best Buy 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 EBay with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Best Buy.

Diversification Opportunities for EBay and Best Buy

0.17

Correlation Coefficient

EBay  Best Buy

Average diversification

The 3 months correlation between EBay and Best is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and EBay 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 eBay Inc are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of EBay i.e., EBay and Best Buy go up and down completely randomly.

Pair Corralation between EBay and Best Buy

Assuming the 90 days horizon eBay Inc is expected to generate 0.92 times more return on investment than Best Buy. However, eBay Inc is 1.08 times less risky than Best Buy. It trades about 0.07 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.01 per unit of risk. If you would invest  5,964  in eBay Inc on September 23, 2024 and sell it today you would earn a total of  142.00  from holding eBay Inc or generate 2.38% return on investment over 90 days.

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

eBay Inc  vs.  Best Buy Co

eBay Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Best Buy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EBay and Best Buy

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

The idea behind eBay Inc and Best Buy Co 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 Commodity Directory module to find actively traded commodities issued by global exchanges.