Correlation Between Trade Desk and Shopify
Can any of the company-specific risk be diversified away by investing in both Trade Desk and Shopify 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 Trade Desk and Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trade Desk and Shopify, you can compare the effects of market volatilities on Trade Desk and Shopify 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 Trade Desk with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Desk and Shopify.
Diversification Opportunities for Trade Desk and Shopify
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trade and Shopify is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Trade Desk and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and Trade Desk 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 Trade Desk are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Trade Desk i.e., Trade Desk and Shopify go up and down completely randomly.
Pair Corralation between Trade Desk and Shopify
Considering the 90-day investment horizon Trade Desk is expected to generate 0.8 times more return on investment than Shopify. However, Trade Desk is 1.25 times less risky than Shopify. It trades about 0.11 of its potential returns per unit of risk. Shopify is currently generating about 0.06 per unit of risk. If you would invest 7,046 in Trade Desk on August 26, 2024 and sell it today you would earn a total of 5,924 from holding Trade Desk or generate 84.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trade Desk vs. Shopify
Performance |
| Timeline |
| Trade Desk |
| Shopify |
Trade Desk and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trade Desk and Shopify
The main advantage of trading using opposite Trade Desk and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.The idea behind Trade Desk and Shopify 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |