Correlation Between Twilio and Snap

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

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

Diversification Opportunities for Twilio and Snap

0.73

Correlation Coefficient

Twilio  Snap

Poor diversification

The 3 months correlation between Twilio and Snap is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Twilio Inc and Snap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap Inc and Twilio 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 Twilio Inc are associated (or correlated) with Snap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap Inc has no effect on the direction of Twilio i.e., Twilio and Snap go up and down completely randomly.

Pair Corralation between Twilio and Snap

Given the investment horizon of 90 days Twilio Inc is expected to under-perform the Snap. But the stock apears to be less risky and, when comparing its historical volatility, Twilio Inc is 4.56 times less risky than Snap. The stock trades about -0.07 of its potential returns per unit of risk. The Snap Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,125  in Snap Inc on January 30, 2024 and sell it today you would earn a total of  330.00  from holding Snap Inc or generate 29.33% return on investment over 90 days.

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

Twilio Inc  vs.  Snap Inc

Twilio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Twilio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Snap Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snap Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Snap is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Twilio and Snap

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

The idea behind Twilio Inc and Snap Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.