Correlation Between EBay and Five Below
Can any of the company-specific risk be diversified away by investing in both EBay and Five Below 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 Five Below into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between eBay Inc and Five Below, you can compare the effects of market volatilities on EBay and Five Below 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 Five Below. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Five Below.
Diversification Opportunities for EBay and Five Below
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between EBay and Five is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of EBay i.e., EBay and Five Below go up and down completely randomly.
Pair Corralation between EBay and Five Below
Given the investment horizon of 90 days eBay Inc is expected to generate 0.53 times more return on investment than Five Below. However, eBay Inc is 1.88 times less risky than Five Below. It trades about 0.01 of its potential returns per unit of risk. Five Below is currently generating about -0.38 per unit of risk. If you would invest 5,123 in eBay Inc on January 25, 2024 and sell it today you would earn a total of 2.00 from holding eBay Inc or generate 0.04% 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. Five Below
Performance |
Timeline |
eBay Inc |
Five Below |
EBay and Five Below Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with EBay and Five Below
The main advantage of trading using opposite EBay and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay position performs unexpectedly, Five Below 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 Five Below will offset losses from the drop in Five Below's long position.The idea behind eBay Inc and Five Below 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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