Correlation Between Alight and StoneCo

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

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

Diversification Opportunities for Alight and StoneCo

-0.47

Correlation Coefficient

Alight  StoneCo

Very good diversification

The 3 months correlation between Alight and StoneCo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alight Inc and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and Alight 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 Alight Inc are associated (or correlated) with StoneCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StoneCo has no effect on the direction of Alight i.e., Alight and StoneCo go up and down completely randomly.

Pair Corralation between Alight and StoneCo

Given the investment horizon of 90 days Alight Inc is expected to under-perform the StoneCo. But the stock apears to be less risky and, when comparing its historical volatility, Alight Inc is 1.3 times less risky than StoneCo. The stock trades about -0.01 of its potential returns per unit of risk. The StoneCo is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  950.00  in StoneCo on September 19, 2024 and sell it today you would lose (146.00) from holding StoneCo or give up 15.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alight Inc  vs.  StoneCo

Alight Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alight Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Alight is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

StoneCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StoneCo 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Alight and StoneCo

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

The idea behind Alight Inc and StoneCo 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.