Correlation Between EBay and Lightinthebox Holding

By analyzing existing cross correlation between EBay Inc and Lightinthebox Holding Co, you can compare the effects of market volatilities on EBay and Lightinthebox Holding 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 Lightinthebox Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Lightinthebox Holding.
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Can any of the company-specific risk be diversified away by investing in both EBay and Lightinthebox Holding 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 Lightinthebox Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for EBay and Lightinthebox Holding

0.76
  Correlation Coefficient
EBay Inc
Lightinthebox Holding

Poor diversification

The 5 months correlation between EBay and Lightinthebox is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding EBay Inc and Lightinthebox Holding Co in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Lightinthebox Holding 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 Lightinthebox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightinthebox Holding has no effect on the direction of EBay i.e., EBay and Lightinthebox Holding go up and down completely randomly.

Pair Corralation between EBay and Lightinthebox Holding

Given the investment horizon of 90 days EBay Inc is expected to under-perform the Lightinthebox Holding. But the stock apears to be less risky and, when comparing its historical volatility, EBay Inc is 2.94 times less risky than Lightinthebox Holding. The stock trades about -0.14 of its potential returns per unit of risk. The Lightinthebox Holding Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  120.00  in Lightinthebox Holding Co on October 29, 2021 and sell it today you would lose (8.00)  from holding Lightinthebox Holding Co or give up 6.67% of portfolio value over 90 days.
Time Period5 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

EBay Inc  vs.  Lightinthebox Holding Co

 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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

EBay Price Channel

Lightinthebox Holding 
Lightinthebox Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lightinthebox Holding Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lightinthebox Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lightinthebox Price Channel

EBay and Lightinthebox Holding Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with EBay and Lightinthebox Holding

The main advantage of trading using opposite EBay and Lightinthebox Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay position performs unexpectedly, Lightinthebox Holding 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 Lightinthebox Holding will offset losses from the drop in Lightinthebox Holding's long position.
The idea behind EBay Inc and Lightinthebox Holding Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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