Correlation Between EBay and Five Below

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

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

Diversification Opportunities for EBay and Five Below

0.87

Correlation Coefficient

EBay  Five Below

Very poor diversification

The 3 months correlation between EBay and Five is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding eBay Inc and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of EBay i.e., EBay and Five Below go up and down completely randomly.

Pair Corralation between EBay and Five Below

Assuming the 90 days horizon EBay is expected to generate 4.05 times less return on investment than Five Below. But when comparing it to its historical volatility, eBay Inc is 2.41 times less risky than Five Below. It trades about 0.19 of its potential returns per unit of risk. Five Below is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  6,644  in Five Below on April 24, 2025 and sell it today you would earn a total of  5,211  from holding Five Below or generate 78.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

eBay Inc  vs.  Five Below

eBay Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EBay reported solid returns over the last few months and may actually be approaching a breakup point.

Five Below

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Five Below reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EBay and Five Below

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

The idea behind eBay Inc and Five Below 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 the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.