Correlation Between Target and Fiverr International

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

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

Diversification Opportunities for Target and Fiverr International

-0.51

Correlation Coefficient

Target  Fiverr International

Excellent diversification

The 3 months correlation between Target and Fiverr is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Target and Fiverr International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiverr International and Target 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 Target are associated (or correlated) with Fiverr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiverr International has no effect on the direction of Target i.e., Target and Fiverr International go up and down completely randomly.

Pair Corralation between Target and Fiverr International

Assuming the 90 days trading horizon Target is expected to generate 3.31 times less return on investment than Fiverr International. But when comparing it to its historical volatility, Target is 1.68 times less risky than Fiverr International. It trades about 0.01 of its potential returns per unit of risk. Fiverr International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  922.00  in Fiverr International on September 28, 2024 and sell it today you would earn a total of  62.00  from holding Fiverr International or generate 6.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.13%
Values	Daily Returns

Target  vs.  Fiverr International

Target

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Target is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fiverr International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fiverr International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiverr International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target and Fiverr International

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

The idea behind Target and Fiverr International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.