Correlation Between EBay and Birks
Can any of the company-specific risk be diversified away by investing in both EBay and Birks 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 Birks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between eBay Inc and Birks Group, you can compare the effects of market volatilities on EBay and Birks 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 Birks. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Birks.
Diversification Opportunities for EBay and Birks
Excellent diversification
The 3 months correlation between EBay and Birks is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Birks Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birks Group 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 Birks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birks Group has no effect on the direction of EBay i.e., EBay and Birks go up and down completely randomly.
Pair Corralation between EBay and Birks
Given the investment horizon of 90 days eBay Inc is expected to generate 0.31 times more return on investment than Birks. However, eBay Inc is 3.18 times less risky than Birks. It trades about -0.07 of its potential returns per unit of risk. Birks Group is currently generating about -0.04 per unit of risk. If you would invest 6,940 in eBay Inc on November 9, 2024 and sell it today you would lose (190.00) from holding eBay Inc or give up 2.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
eBay Inc vs. Birks Group
Performance |
| Timeline |
| eBay Inc |
| Birks Group |
EBay and Birks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EBay and Birks
The main advantage of trading using opposite EBay and Birks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay position performs unexpectedly, Birks 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 Birks will offset losses from the drop in Birks' long position.The idea behind eBay Inc and Birks Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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