Correlation Between Teladoc and Square
Can any of the company-specific risk be diversified away by investing in both Teladoc and Square 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 Teladoc and Square into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teladoc and Square Inc, you can compare the effects of market volatilities on Teladoc and Square 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 Teladoc with a short position of Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teladoc and Square.
Diversification Opportunities for Teladoc and Square
Poor diversification
The 3 months correlation between Teladoc and Square is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Teladoc and Square Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Square Inc and Teladoc 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 Teladoc are associated (or correlated) with Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Square Inc has no effect on the direction of Teladoc i.e., Teladoc and Square go up and down completely randomly.
Pair Corralation between Teladoc and Square
Assuming the 90 days horizon Teladoc is expected to generate 1.37 times more return on investment than Square. However, Teladoc is 1.37 times more volatile than Square Inc. It trades about 0.24 of its potential returns per unit of risk. Square Inc is currently generating about 0.26 per unit of risk. If you would invest 845.00 in Teladoc on August 29, 2024 and sell it today you would earn a total of 255.00 from holding Teladoc or generate 30.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teladoc vs. Square Inc
Performance |
| Timeline |
| Teladoc |
| Square Inc |
Teladoc and Square Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teladoc and Square
The main advantage of trading using opposite Teladoc and Square positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teladoc position performs unexpectedly, Square 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 Square will offset losses from the drop in Square's long position.The idea behind Teladoc and Square 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.| Square vs. Shopify | Square vs. BYD Company Limited | Square vs. PayPal Holdings | Square vs. Palantir Technologies |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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