Correlation Between Freshworks and Gitlab

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

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

Diversification Opportunities for Freshworks and Gitlab

0.9

Correlation Coefficient

Freshworks  Gitlab

Almost no diversification

The 3 months correlation between Freshworks and Gitlab is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Freshworks and Gitlab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gitlab Inc and Freshworks 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 Freshworks are associated (or correlated) with Gitlab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gitlab Inc has no effect on the direction of Freshworks i.e., Freshworks and Gitlab go up and down completely randomly.

Pair Corralation between Freshworks and Gitlab

Given the investment horizon of 90 days Freshworks is expected to generate 0.7 times more return on investment than Gitlab. However, Freshworks is 1.42 times less risky than Gitlab. It trades about -0.04 of its potential returns per unit of risk. Gitlab Inc is currently generating about -0.05 per unit of risk. If you would invest  1,600  in Freshworks on December 30, 2024 and sell it today you would lose (147.00) from holding Freshworks or give up 9.19% of portfolio value over 90 days.

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

Freshworks  vs.  Gitlab Inc

Freshworks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freshworks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Gitlab Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gitlab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Freshworks and Gitlab

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

The idea behind Freshworks and Gitlab 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.