Correlation Between Twilio and TuanChe ADR

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

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

Diversification Opportunities for Twilio and TuanChe ADR

-0.9

Correlation Coefficient

Twilio  TuanChe ADR

Pay attention - limited upside

The 3 months correlation between Twilio and TuanChe is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Twilio Inc and TuanChe ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TuanChe ADR 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 TuanChe ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TuanChe ADR has no effect on the direction of Twilio i.e., Twilio and TuanChe ADR go up and down completely randomly.

Pair Corralation between Twilio and TuanChe ADR

Given the investment horizon of 90 days Twilio Inc is expected to generate 0.37 times more return on investment than TuanChe ADR. However, Twilio Inc is 2.67 times less risky than TuanChe ADR. It trades about 0.38 of its potential returns per unit of risk. TuanChe ADR is currently generating about -0.08 per unit of risk. If you would invest  6,084  in Twilio Inc on September 4, 2024 and sell it today you would earn a total of  4,646  from holding Twilio Inc or generate 76.36% return on investment over 90 days.

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

Twilio Inc  vs.  TuanChe ADR

Twilio Inc

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Twilio Inc are ranked lower than 29 (%) 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.

TuanChe ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TuanChe ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Twilio and TuanChe ADR

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

The idea behind Twilio Inc and TuanChe ADR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.