Correlation Between Snap and Hello
Can any of the company-specific risk be diversified away by investing in both Snap and Hello 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 Hello into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Hello Group, you can compare the effects of market volatilities on Snap and Hello 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 Hello. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Hello.
Diversification Opportunities for Snap and Hello
Very weak diversification
The 3 months correlation between Snap and Hello is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Hello Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hello Group 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 Hello. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hello Group has no effect on the direction of Snap i.e., Snap and Hello go up and down completely randomly.
Pair Corralation between Snap and Hello
Given the investment horizon of 90 days Snap Inc is expected to generate 2.11 times more return on investment than Hello. However, Snap is 2.11 times more volatile than Hello Group. It trades about 0.1 of its potential returns per unit of risk. Hello Group is currently generating about -0.18 per unit of risk. If you would invest 1,071 in Snap Inc on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Snap Inc or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Hello Group
Performance |
| Timeline |
| Snap Inc |
| Hello Group |
Snap and Hello Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Hello
The main advantage of trading using opposite Snap and Hello positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Hello 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 Hello will offset losses from the drop in Hello's long position.The idea behind Snap Inc and Hello 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.| Hello vs. Weibo Corp | Hello vs. Autohome | Hello vs. Tencent Music Entertainment | Hello vs. DouYu International Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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