Correlation Between Global E and Overstockcom
Can any of the company-specific risk be diversified away by investing in both Global E and Overstockcom 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 Global E and Overstockcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Online and Overstockcom, you can compare the effects of market volatilities on Global E and Overstockcom 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 Global E with a short position of Overstockcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Overstockcom.
Diversification Opportunities for Global E and Overstockcom
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Overstockcom is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Overstockcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstockcom and Global E 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 Global E Online are associated (or correlated) with Overstockcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstockcom has no effect on the direction of Global E i.e., Global E and Overstockcom go up and down completely randomly.
Pair Corralation between Global E and Overstockcom
Given the investment horizon of 90 days Global E is expected to generate 2.04 times less return on investment than Overstockcom. But when comparing it to its historical volatility, Global E Online is 1.33 times less risky than Overstockcom. It trades about 0.05 of its potential returns per unit of risk. Overstockcom is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,296 in Overstockcom on August 27, 2024 and sell it today you would earn a total of 796.00 from holding Overstockcom or generate 34.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 25.71% |
| Values | Daily Returns |
Global E Online vs. Overstockcom
Performance |
| Timeline |
| Global E Online |
| Overstockcom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Global E and Overstockcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global E and Overstockcom
The main advantage of trading using opposite Global E and Overstockcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E position performs unexpectedly, Overstockcom 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 Overstockcom will offset losses from the drop in Overstockcom's long position.The idea behind Global E Online and Overstockcom 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.| Overstockcom vs. Etsy Inc | Overstockcom vs. Chewy Inc | Overstockcom vs. PDD Holdings | Overstockcom vs. Sea |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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