Correlation Between LiveWire and EBay

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

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

Diversification Opportunities for LiveWire and EBay

-0.93

Correlation Coefficient

LiveWire  EBay

Pay attention - limited upside

The 3 months correlation between LiveWire and EBay is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding LiveWire Group and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and LiveWire 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 LiveWire Group are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of LiveWire i.e., LiveWire and EBay go up and down completely randomly.

Pair Corralation between LiveWire and EBay

Given the investment horizon of 90 days LiveWire Group is expected to generate 3.1 times more return on investment than EBay. However, LiveWire is 3.1 times more volatile than eBay Inc. It trades about 0.06 of its potential returns per unit of risk. eBay Inc is currently generating about -0.12 per unit of risk. If you would invest  667.00  in LiveWire Group on February 4, 2024 and sell it today you would earn a total of  22.00  from holding LiveWire Group or generate 3.3% return on investment over 90 days.

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

LiveWire Group  vs.  eBay Inc

LiveWire Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiveWire Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

eBay Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LiveWire and EBay

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

The idea behind LiveWire Group and eBay 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..