Correlation Between Robinhood Markets and StoneCo

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

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

Diversification Opportunities for Robinhood Markets and StoneCo

-0.84

Correlation Coefficient

Robinhood Markets  StoneCo

Pay attention - limited upside

The 3 months correlation between Robinhood and StoneCo is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Robinhood Markets and StoneCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StoneCo and Robinhood Markets 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 Robinhood Markets 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 Robinhood Markets i.e., Robinhood Markets and StoneCo go up and down completely randomly.

Pair Corralation between Robinhood Markets and StoneCo

Given the investment horizon of 90 days Robinhood Markets is expected to generate 1.15 times more return on investment than StoneCo. However, Robinhood Markets is 1.15 times more volatile than StoneCo. It trades about 0.11 of its potential returns per unit of risk. StoneCo is currently generating about 0.0 per unit of risk. If you would invest  805.00  in Robinhood Markets on September 19, 2024 and sell it today you would earn a total of  2,903  from holding Robinhood Markets or generate 360.62% return on investment over 90 days.

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

Robinhood Markets  vs.  StoneCo

Robinhood Markets

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Robinhood Markets are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Robinhood Markets exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Robinhood Markets and StoneCo

The main advantage of trading using opposite Robinhood Markets and StoneCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Robinhood Markets 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 Robinhood Markets 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.