Correlation Between Basic Materials and Snowflake
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Snowflake 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 Basic Materials and Snowflake into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Snowflake, you can compare the effects of market volatilities on Basic Materials and Snowflake 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 Basic Materials with a short position of Snowflake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Snowflake.
Diversification Opportunities for Basic Materials and Snowflake
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Basic and Snowflake is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Snowflake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snowflake and Basic Materials 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 Basic Materials are associated (or correlated) with Snowflake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snowflake has no effect on the direction of Basic Materials i.e., Basic Materials and Snowflake go up and down completely randomly.
Pair Corralation between Basic Materials and Snowflake
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Snowflake. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.95 times less risky than Snowflake. The index trades about -0.11 of its potential returns per unit of risk. The Snowflake is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,514 in Snowflake on September 24, 2024 and sell it today you would lose (12.00) from holding Snowflake or give up 0.48% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Basic Materials vs. Snowflake
Performance |
Timeline |
Basic Materials and Snowflake Volatility Contrast
Predicted Return Density |
Returns |
Basic Materials
Pair trading matchups for Basic Materials
Snowflake
Pair trading matchups for Snowflake
Pair Trading with Basic Materials and Snowflake
The main advantage of trading using opposite Basic Materials and Snowflake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Snowflake 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 Snowflake will offset losses from the drop in Snowflake's long position.Basic Materials vs. American Airlines Group | Basic Materials vs. Paycom Software | Basic Materials vs. Taiwan Semiconductor Manufacturing | Basic Materials vs. United Airlines Holdings |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
Global Correlations Find global opportunities by holding instruments from different markets | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |