Correlation Between Hello and Snap
Can any of the company-specific risk be diversified away by investing in both Hello and Snap 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 Hello and Snap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hello Group and Snap Inc, you can compare the effects of market volatilities on Hello and Snap 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 Hello with a short position of Snap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hello and Snap.
Diversification Opportunities for Hello and Snap
Very weak diversification
The 3 months correlation between Hello and Snap is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hello Group and Snap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap Inc and Hello 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 Hello Group are associated (or correlated) with Snap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap Inc has no effect on the direction of Hello i.e., Hello and Snap go up and down completely randomly.
Pair Corralation between Hello and Snap
Given the investment horizon of 90 days Hello Group is expected to generate 0.69 times more return on investment than Snap. However, Hello Group is 1.46 times less risky than Snap. It trades about 0.02 of its potential returns per unit of risk. Snap Inc is currently generating about 0.01 per unit of risk. If you would invest 606.00 in Hello Group on August 24, 2024 and sell it today you would earn a total of 32.00 from holding Hello Group or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Hello Group vs. Snap Inc
Performance |
| Timeline |
| Hello Group |
| Snap Inc |
Hello and Snap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hello and Snap
The main advantage of trading using opposite Hello and Snap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hello position performs unexpectedly, Snap 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 Snap will offset losses from the drop in Snap's long position.The idea behind Hello Group and Snap 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.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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