Correlation Between Snap and Momo
Can any of the company-specific risk be diversified away by investing in both Snap and Momo 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 Snap and Momo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and momo Inc, you can compare the effects of market volatilities on Snap and Momo 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 Snap with a short position of Momo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Momo.
Diversification Opportunities for Snap and Momo
Very good diversification
The 3 months correlation between Snap and Momo is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and momo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on momo Inc and Snap 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 Snap Inc are associated (or correlated) with Momo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of momo Inc has no effect on the direction of Snap i.e., Snap and Momo go up and down completely randomly.
Pair Corralation between Snap and Momo
Given the investment horizon of 90 days Snap Inc is expected to generate 2.11 times more return on investment than Momo. However, Snap is 2.11 times more volatile than momo Inc. It trades about -0.03 of its potential returns per unit of risk. momo Inc is currently generating about -0.09 per unit of risk. If you would invest 1,216 in Snap Inc on September 1, 2024 and sell it today you would lose (35.00) from holding Snap Inc or give up 2.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Snap Inc vs. momo Inc
Performance |
| Timeline |
| Snap Inc |
| momo Inc |
Snap and Momo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Momo
The main advantage of trading using opposite Snap and Momo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Momo 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 Momo will offset losses from the drop in Momo's long position.The idea behind Snap Inc and momo 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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