Correlation Between Shopify and Expensify

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

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

Diversification Opportunities for Shopify and Expensify

0.62

Correlation Coefficient

Shopify  Expensify

Poor diversification

The 3 months correlation between Shopify and Expensify is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Expensify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expensify and Shopify 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 Shopify are associated (or correlated) with Expensify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expensify has no effect on the direction of Shopify i.e., Shopify and Expensify go up and down completely randomly.

Pair Corralation between Shopify and Expensify

Given the investment horizon of 90 days Shopify is expected to generate 0.4 times more return on investment than Expensify. However, Shopify is 2.52 times less risky than Expensify. It trades about 0.11 of its potential returns per unit of risk. Expensify is currently generating about -0.01 per unit of risk. If you would invest  7,487  in Shopify on June 21, 2024 and sell it today you would earn a total of  381.00  from holding Shopify or generate 5.09% return on investment over 90 days.

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

Shopify  vs.  Expensify

Shopify

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Expensify

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Expensify are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Expensify showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shopify and Expensify

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

The idea behind Shopify and Expensify 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.