Correlation Between Twilio and EBay

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

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

Diversification Opportunities for Twilio and EBay

-0.27

Correlation Coefficient

Twilio  EBay

Very good diversification

The 3 months correlation between Twilio and EBay is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Twilio Inc and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and Twilio 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 Twilio 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 Twilio i.e., Twilio and EBay go up and down completely randomly.

Pair Corralation between Twilio and EBay

Given the investment horizon of 90 days Twilio is expected to generate 1.05 times less return on investment than EBay. In addition to that, Twilio is 1.51 times more volatile than eBay Inc. It trades about 0.14 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.22 per unit of volatility. If you would invest  6,115  in eBay Inc on September 22, 2024 and sell it today you would earn a total of  386.00  from holding eBay Inc or generate 6.31% return on investment over 90 days.

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

Twilio Inc  vs.  eBay Inc

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.

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 Twilio and EBay

The main advantage of trading using opposite Twilio and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Twilio 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 Twilio 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.