Correlation Between Edgio and Cloudflare

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

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

Diversification Opportunities for Edgio and Cloudflare

-0.62

Correlation Coefficient

Edgio  Cloudflare

Excellent diversification

The 3 months correlation between Edgio and Cloudflare is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Edgio Inc and Cloudflare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cloudflare and Edgio 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 Edgio Inc are associated (or correlated) with Cloudflare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cloudflare has no effect on the direction of Edgio i.e., Edgio and Cloudflare go up and down completely randomly.

Pair Corralation between Edgio and Cloudflare

Given the investment horizon of 90 days Edgio Inc is expected to generate 87.37 times more return on investment than Cloudflare. However, Edgio is 87.37 times more volatile than Cloudflare. It trades about 0.23 of its potential returns per unit of risk. Cloudflare is currently generating about 0.16 per unit of risk. If you would invest  650.00  in Edgio Inc on September 1, 2024 and sell it today you would lose (648.00) from holding Edgio Inc or give up 99.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Edgio Inc  vs.  Cloudflare

Edgio Inc

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Edgio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very abnormal forward indicators, Edgio displayed solid returns over the last few months and may actually be approaching a breakup point.

Cloudflare

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Cloudflare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edgio and Cloudflare

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

The idea behind Edgio Inc and Cloudflare 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.