Wednesday, July 25, 2012

Correlations Among Facebook and Zynga

See previous related post: Facebook: Two Months Since IPO

After the market closed Wednesday, Zynga (NASDAQ: ZNGA) delivered a disappointing Q2 earnings report and outlook. Revenue was $332.5 million, short of the $343.1 million predicted by analysts. Profit was 1 cent a share, short of the 6-cent average estimate. Furthermore, Zynga cites that due to "delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something," 2012 bookings will be around $1.15 billion to $1.225 billion, short of the projection from April of $1.43 billion to $1.5 billion. In the after hours, shares of Zynga have fallen by over 38%, but it wasn't the only one negatively affected by this news. Facebook saw its shares dip over 7% in the after hours.

The link between Zynga and Facebook (NASDAQ: FB)  is evident in the latter's mention in Zynga's report today. Just how correlated have the stock movements of the two companies been? How about their correlations to LinkedIn (NYSE: LNKD)? Historical prices, since Facebook's IPO in mid-May, were compiled from Google Finance, and the daily changes were documented:

Date  Zynga Facebook LinkedIn Boeing
25-Jul 3.25% 3.13% -0.78% 2.78%
24-Jul -3.34% -1.04% -1.16% -1.21%
23-Jul 6.04% -0.03% -1.94% -1.33%
20-Jul 5.26% -0.83% -2.20% -1.30%
19-Jul -1.08% -0.38% 3.86% 1.31%
18-Jul 0.66% 3.63% 0.74% 1.07%
17-Jul -5.18% -0.53% 0.61% 0.19%
16-Jul -1.43% -8.07% -2.25% -0.73%
13-Jul -2.39% -0.29% 0.91% 2.51%
12-Jul 1.41% -0.52% 3.52% 0.27%
11-Jul -1.20% -1.59% 1.56% -2.32%
10-Jul -4.39% -2.18% -3.35% -1.09%
9-Jul -2.24% 1.39% -5.40% 0.46%
6-Jul -1.47% 0.83% 0.57% -1.01%
5-Jul 0.74% 0.87% -0.28% 0.23%
3-Jul -2.88% 1.40% 0.85% 1.49%
2-Jul 2.21% -1.06% 1.28% -1.51%
29-Jun 1.12% -0.83% 3.44% 3.80%
28-Jun -4.44% -2.70% -2.31% -0.40%
27-Jun -2.26% -2.63% -1.17% 1.33%
26-Jun -4.95% 3.24% 3.27% -0.17%
25-Jun 1.00% -3.00% -3.56% -1.26%
22-Jun 4.90% 3.80% 4.56% 0.83%
21-Jun -2.89% 0.76% -2.93% -2.25%
20-Jun -1.34% -0.97% -0.07% 0.12%
19-Jun 3.29% 1.59% 0.17% 1.42%
18-Jun 3.96% 4.67% 3.09% -0.13%
15-Jun 10.76% 6.08% 3.78% 0.19%
14-Jun -0.40% 3.74% 2.89% -0.29%
13-Jun 1.20% -0.47% 1.13% -0.72%
12-Jun -10.27% 1.48% 0.18% 3.52%
11-Jun -8.26% -0.37% -2.05% 0.24%
8-Jun 0.33% 3.00% 2.26% -0.01%
7-Jun -2.11% -1.86% 1.13% 1.35%
6-Jun 7.50% 3.63% 0.09% 2.13%
5-Jun 0.35% -3.83% 2.10% 0.12%
4-Jun -4.99% -2.96% -0.46% 0.39%
1-Jun -3.99% -6.35% -4.78% -3.40%
31-May 6.64% 5.00% -2.07% 0.32%
30-May -3.61% -2.25% -1.81% -1.43%
29-May -7.87% -9.62% 1.44% 0.57%
25-May -2.79% -3.39% -0.28% -1.95%
24-May -3.82% 3.22% -4.60% -0.25%
23-May 3.97% 3.23% 2.20% 0.13%
22-May -4.09% -8.90% 4.64% -0.42%
21-May -0.98% -10.99% -2.20% 3.80%
18-May -13.42% 0.61% -5.65% -0.83%

As a control group, Boeing (NYSE: BA) was also selected to represent a company from the vastly different sector of industrial. The correlations among these vectors were calculated using the =CORREL() Excel function, as the results are as follows:
  • ZNGA / FB: 0.41262114
  • ZNGA / LNKD: 0.327412705
  • FB / LNKD: 0.187973772
  • ZNGA / BA: 0.067813629
  • FB / BA: 0.112054524
  • LNKD / BA: 0.285873686
Among these results, Facebook and Zynga did have the highest correlation, greater than either one's to LinkedIn. At the same time, Boeing had the highest correlation to LinkedIn, compared to either Zynga or Facebook. Given the high correlation between Zynga and Facebook, the latter of which is due to deliver its first earnings report as a public company on Thursday, it looks like Zynga, right after its disappointing report, has a good immediate chance to rebound back up or dip further.

Sources:
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