Correlation Between RobloxCorp and SohuCom

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

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

Diversification Opportunities for RobloxCorp and SohuCom

-0.63

Correlation Coefficient

RobloxCorp  SohuCom

Excellent diversification

The 3 months correlation between RobloxCorp and SohuCom is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding RobloxCorp and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom and RobloxCorp 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 RobloxCorp are associated (or correlated) with SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of RobloxCorp i.e., RobloxCorp and SohuCom go up and down completely randomly.

Pair Corralation between RobloxCorp and SohuCom

Given the investment horizon of 90 days RobloxCorp is expected to under-perform the SohuCom. In addition to that, RobloxCorp is 1.49 times more volatile than SohuCom. It trades about -0.1 of its total potential returns per unit of risk. SohuCom is currently generating about 0.25 per unit of volatility. If you would invest  1,075  in SohuCom on January 30, 2024 and sell it today you would earn a total of  86.00  from holding SohuCom or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

RobloxCorp  vs.  SohuCom

RobloxCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RobloxCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, RobloxCorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SohuCom

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SohuCom are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical indicators, SohuCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RobloxCorp and SohuCom

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

The idea behind RobloxCorp and SohuCom 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.