Correlation Between EBay and Twilio

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

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

Diversification Opportunities for EBay and Twilio

-0.27

Correlation Coefficient

EBay  Twilio

Very good diversification

The 3 months correlation between EBay and Twilio is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Twilio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twilio Inc 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 Twilio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twilio Inc has no effect on the direction of EBay i.e., EBay and Twilio go up and down completely randomly.

Pair Corralation between EBay and Twilio

Given the investment horizon of 90 days EBay is expected to generate 15.0 times less return on investment than Twilio. But when comparing it to its historical volatility, eBay Inc is 1.51 times less risky than Twilio. It trades about 0.04 of its potential returns per unit of risk. Twilio Inc is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  6,303  in Twilio Inc on September 22, 2024 and sell it today you would earn a total of  4,490  from holding Twilio Inc or generate 71.24% return on investment over 90 days.

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

eBay Inc  vs.  Twilio Inc

eBay Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, EBay is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Twilio Inc

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Twilio Inc are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Twilio displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EBay and Twilio

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

The idea behind eBay Inc and Twilio Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.