Correlation Between EBay and Appian Corp

Can any of the company-specific risk be diversified away by investing in both EBay and Appian Corp 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 EBay and Appian Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between eBay Inc and Appian Corp, you can compare the effects of market volatilities on EBay and Appian Corp 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 EBay with a short position of Appian Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Appian Corp.

Diversification Opportunities for EBay and Appian Corp

0.78

Correlation Coefficient

EBay  Appian Corp

Poor diversification

The 3 months correlation between EBay and Appian is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Appian Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appian Corp and EBay 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 eBay Inc are associated (or correlated) with Appian Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appian Corp has no effect on the direction of EBay i.e., EBay and Appian Corp go up and down completely randomly.

Pair Corralation between EBay and Appian Corp

Given the investment horizon of 90 days eBay Inc is expected to under-perform the Appian Corp. But the stock apears to be less risky and, when comparing its historical volatility, eBay Inc is 2.71 times less risky than Appian Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Appian Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,782  in Appian Corp on January 30, 2024 and sell it today you would lose (12.00) from holding Appian Corp or give up 0.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

eBay Inc  vs.  Appian Corp

eBay Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

Appian Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Appian Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Appian Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EBay and Appian Corp

The main advantage of trading using opposite EBay and Appian Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay position performs unexpectedly, Appian Corp 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 Appian Corp will offset losses from the drop in Appian Corp's long position.

The idea behind eBay Inc and Appian Corp 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.