Correlation Between Bandwidth and WixCom
Can any of the company-specific risk be diversified away by investing in both Bandwidth and WixCom 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 Bandwidth and WixCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bandwidth and WixCom, you can compare the effects of market volatilities on Bandwidth and WixCom 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 Bandwidth with a short position of WixCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bandwidth and WixCom.
Diversification Opportunities for Bandwidth and WixCom
Very poor diversification
The 3 months correlation between Bandwidth and WixCom is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bandwidth and WixCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WixCom and Bandwidth 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 Bandwidth are associated (or correlated) with WixCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WixCom has no effect on the direction of Bandwidth i.e., Bandwidth and WixCom go up and down completely randomly.
Pair Corralation between Bandwidth and WixCom
Given the investment horizon of 90 days Bandwidth is expected to under-perform the WixCom. But the stock apears to be less risky and, when comparing its historical volatility, Bandwidth is 1.04 times less risky than WixCom. The stock trades about -0.03 of its potential returns per unit of risk. The WixCom is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 18,434 in WixCom on September 14, 2024 and sell it today you would earn a total of 3,643 from holding WixCom or generate 19.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bandwidth vs. WixCom
Performance |
| Timeline |
| Bandwidth |
| WixCom |
Bandwidth and WixCom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bandwidth and WixCom
The main advantage of trading using opposite Bandwidth and WixCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bandwidth position performs unexpectedly, WixCom 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 WixCom will offset losses from the drop in WixCom's long position.| Bandwidth vs. DigitalOcean Holdings | Bandwidth vs. Adyen NV | Bandwidth vs. Okta Inc | Bandwidth vs. Confluent |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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