Correlation Between GigaCloud Technology and StoneCo

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

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

Diversification Opportunities for GigaCloud Technology and StoneCo

0.02

Correlation Coefficient

GigaCloud Technology  StoneCo

Significant diversification

The 3 months correlation between GigaCloud and StoneCo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding GigaCloud Technology Class and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and GigaCloud Technology 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 GigaCloud Technology Class are associated (or correlated) with StoneCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StoneCo has no effect on the direction of GigaCloud Technology i.e., GigaCloud Technology and StoneCo go up and down completely randomly.

Pair Corralation between GigaCloud Technology and StoneCo

Considering the 90-day investment horizon GigaCloud Technology Class is expected to generate 1.88 times more return on investment than StoneCo. However, GigaCloud Technology is 1.88 times more volatile than StoneCo. It trades about 0.02 of its potential returns per unit of risk. StoneCo is currently generating about -0.15 per unit of risk. If you would invest  1,830  in GigaCloud Technology Class on September 20, 2024 and sell it today you would lose (58.00) from holding GigaCloud Technology Class or give up 3.17% of portfolio value over 90 days.

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

GigaCloud Technology Class  vs.  StoneCo

GigaCloud Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GigaCloud Technology Class are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, GigaCloud Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

StoneCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StoneCo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GigaCloud Technology and StoneCo

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

The idea behind GigaCloud Technology Class and StoneCo 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.