Correlation Between Box and StoneCo

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

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

Diversification Opportunities for Box and StoneCo

0.06

Correlation Coefficient

Box  StoneCo

Significant diversification

The 3 months correlation between Box and StoneCo is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Box Inc and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and Box 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 Box 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 Box i.e., Box and StoneCo go up and down completely randomly.

Pair Corralation between Box and StoneCo

Considering the 90-day investment horizon Box Inc is expected to under-perform the StoneCo. But the stock apears to be less risky and, when comparing its historical volatility, Box Inc is 2.45 times less risky than StoneCo. The stock trades about -0.03 of its potential returns per unit of risk. The StoneCo is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  819.00  in StoneCo on December 27, 2024 and sell it today you would earn a total of  320.00  from holding StoneCo or generate 39.07% return on investment over 90 days.

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

Box Inc  vs.  StoneCo

Box Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Box Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Box is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

StoneCo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in StoneCo are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, StoneCo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Box and StoneCo

The main advantage of trading using opposite Box and StoneCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Box 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 Box 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.