Twitter Inc stock took another rattling on Monday morning as traders continued to view the firm’s growth with great skepticism. The firm has lost the faith of almost every trader on Wall Street at this stage, and it may be headed for its lowest ever close on Monday afternoon.
At time of writing shares in the social network were selling for $22.45, down 2.31 percent for the morning so far. In the last six months the firm’s shares have lost more than 37 percent of their value. Those watching the shares, holding onto it, may feel like it’s become worthless, and it turns our, looking at the charts, that you might as well burn Twitter stock.
Twitter looks a lot like oil
Twitter doesn’t seem to have a whole lot in common with the price of oil, but Wall Street has been treating the firm almost precisely the same as the black liquid for months. Since the value of Twitter collapsed earlier this year the firm’s shares have traded almost in lockstep with the price of oil.
The United States Oil Fund LP (ETF) is supposed to track the ups and downs in the price of crude. As you can see from the above chart, it also does a pretty good job of tracking the ups and down in the price of Twitter stock.
A quick check of the correlation between Twitter Inc stock and shares in the ETF shows a correlation coefficient of 0.92, meaning that there is a very strong relationship between the two instruments.
Twitter Inc stock movement is much more related to the price of oil than it is to the price of the stock market as a whole. The firm’s correlation coefficient with the S&P 500 ETF SPDR S&P 500 ETF Trust sits at just 51 percent. Just because something looks like oil, however, doesn’t mean it should be burned, and there’s a better than good chance that this is all just coincidental.
Don’t expect OPEC to boost Twitter
Saudi prince Alaweed Bin Talal may have a huge stake in Twitter, but the correlation between Twitter Inc stock and the price of the United States Oil Fund LP (ETF) appears to be spurious.
So far in 2015 the market in general has tended to have a bad day when the price of oil dropped. Even though Twitter appears to be more highly linked with the price of a barrel of oil than anything else, it’s not likely a good indicator for the future value of the stock.
For those holding Twitter stock and frustrated at the massive losses in 2015, it’s not time to lobby the government to restrict fracking or to put new sanctions on Iran. The links between Twitter stock and the price of the United States Oil Fund LP (ETF) is more than likely a cosmetic feature of a market with literally thousands of instruments all correlated with each other in some way.