Correlation Between Confluent and Crowdstrike Holdings

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

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

Diversification Opportunities for Confluent and Crowdstrike Holdings

0.93

Correlation Coefficient

Confluent  Crowdstrike Holdings

Almost no diversification

The 3 months correlation between Confluent and Crowdstrike is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Confluent and Crowdstrike Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crowdstrike Holdings 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 Crowdstrike Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crowdstrike Holdings has no effect on the direction of Confluent i.e., Confluent and Crowdstrike Holdings go up and down completely randomly.

Pair Corralation between Confluent and Crowdstrike Holdings

Given the investment horizon of 90 days Confluent is expected to generate 1.77 times less return on investment than Crowdstrike Holdings. In addition to that, Confluent is 1.56 times more volatile than Crowdstrike Holdings. It trades about 0.04 of its total potential returns per unit of risk. Crowdstrike Holdings is currently generating about 0.1 per unit of volatility. If you would invest  10,457  in Crowdstrike Holdings on September 19, 2024 and sell it today you would earn a total of  24,461  from holding Crowdstrike Holdings or generate 233.92% return on investment over 90 days.

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

Confluent  vs.  Crowdstrike Holdings

Confluent

Risk-Adjusted Performance

14 of 100

Solid

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

Crowdstrike Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crowdstrike Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Crowdstrike Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Confluent and Crowdstrike Holdings

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

The idea behind Confluent and Crowdstrike Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.