Correlation Between Snap and EBay

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

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

Diversification Opportunities for Snap and EBay

-0.31

Correlation Coefficient

Snap  EBay

Very good diversification

The 3 months correlation between Snap and EBay is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and Snap 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 Snap Inc are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Snap i.e., Snap and EBay go up and down completely randomly.

Pair Corralation between Snap and EBay

Given the investment horizon of 90 days Snap Inc is expected to generate 2.1 times more return on investment than EBay. However, Snap is 2.1 times more volatile than eBay Inc. It trades about 0.11 of its potential returns per unit of risk. eBay Inc is currently generating about 0.22 per unit of risk. If you would invest  1,063  in Snap Inc on September 22, 2024 and sell it today you would earn a total of  67.00  from holding Snap Inc or generate 6.3% return on investment over 90 days.

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

Snap Inc  vs.  eBay Inc

Snap Inc

Risk-Adjusted Performance

5 of 100

Modest

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

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.

Pair Trading with Snap and EBay

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

The idea behind Snap Inc and eBay 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.