Correlation Between Dlocal and Toast

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

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

Diversification Opportunities for Dlocal and Toast

0.84

Correlation Coefficient

Dlocal  Toast

Very poor diversification

The 3 months correlation between Dlocal and Toast is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dlocal and Toast Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toast Inc and Dlocal 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 Dlocal are associated (or correlated) with Toast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toast Inc has no effect on the direction of Dlocal i.e., Dlocal and Toast go up and down completely randomly.

Pair Corralation between Dlocal and Toast

Considering the 90-day investment horizon Dlocal is expected to generate 1.14 times less return on investment than Toast. In addition to that, Dlocal is 1.09 times more volatile than Toast Inc. It trades about 0.18 of its total potential returns per unit of risk. Toast Inc is currently generating about 0.22 per unit of volatility. If you would invest  2,619  in Toast Inc on September 13, 2024 and sell it today you would earn a total of  1,208  from holding Toast Inc or generate 46.12% return on investment over 90 days.

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

Dlocal  vs.  Toast Inc

Dlocal

Risk-Adjusted Performance

13 of 100

Good

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

Toast Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Toast Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Toast unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dlocal and Toast

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

The idea behind Dlocal and Toast Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.