Correlation Between Confluent and Bandwidth

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

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

Diversification Opportunities for Confluent and Bandwidth

0.72

Correlation Coefficient

Confluent  Bandwidth

Poor diversification

The 3 months correlation between Confluent and Bandwidth is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Confluent and Bandwidth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bandwidth and Confluent 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 Confluent are associated (or correlated) with Bandwidth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bandwidth has no effect on the direction of Confluent i.e., Confluent and Bandwidth go up and down completely randomly.

Pair Corralation between Confluent and Bandwidth

Given the investment horizon of 90 days Confluent is expected to generate 3.55 times less return on investment than Bandwidth. But when comparing it to its historical volatility, Confluent is 1.09 times less risky than Bandwidth. It trades about 0.01 of its potential returns per unit of risk. Bandwidth is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,332  in Bandwidth on September 30, 2024 and sell it today you would earn a total of  400.00  from holding Bandwidth or generate 30.03% return on investment over 90 days.

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

Confluent  vs.  Bandwidth

Confluent

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bandwidth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bandwidth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bandwidth is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Confluent and Bandwidth

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

The idea behind Confluent and Bandwidth 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 Valuation module to check real value of public entities based on technical and fundamental data.