Correlation Between EBay and Imedia Brands

By analyzing existing cross correlation between EBay Inc and Imedia Brands, you can compare the effects of market volatilities on EBay and Imedia Brands 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 Imedia Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Imedia Brands.

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

Diversification Opportunities for EBay and Imedia Brands

0.25
  Correlation Coefficient
EBay Inc
Imedia Brands

Modest diversification

The 3 months correlation between EBay and Imedia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding EBay Inc and Imedia Brands in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Imedia Brands 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 Imedia Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imedia Brands has no effect on the direction of EBay i.e., EBay and Imedia Brands go up and down completely randomly.

Pair Corralation between EBay and Imedia Brands

Given the investment horizon of 90 days EBay Inc is expected to under-perform the Imedia Brands. But the stock apears to be less risky and, when comparing its historical volatility, EBay Inc is 2.88 times less risky than Imedia Brands. The stock trades about -0.16 of its potential returns per unit of risk. The Imedia Brands is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  606.00  in Imedia Brands on August 31, 2021 and sell it today you would earn a total of  87.00  from holding Imedia Brands or generate 14.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

EBay Inc  vs.  Imedia Brands

 Performance (%) 
      Timeline 
EBay Inc 
EBay Performance
0 of 100
Over the last 90 days EBay Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, EBay is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EBay Price Channel

Imedia Brands 
Imedia Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Imedia Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Imedia Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Imedia Price Channel

EBay and Imedia Brands Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with EBay and Imedia Brands

The main advantage of trading using opposite EBay and Imedia Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay position performs unexpectedly, Imedia Brands 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 Imedia Brands will offset losses from the drop in Imedia Brands' long position.
The idea behind EBay Inc and Imedia Brands 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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