Correlation Between Cloudflare and Edgio

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

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

Diversification Opportunities for Cloudflare and Edgio

0.0

Correlation Coefficient

Cloudflare  Edgio

Pay attention - limited upside

The 3 months correlation between Cloudflare and Edgio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cloudflare and Edgio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgio Inc and Cloudflare 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 Cloudflare are associated (or correlated) with Edgio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgio Inc has no effect on the direction of Cloudflare i.e., Cloudflare and Edgio go up and down completely randomly.

Pair Corralation between Cloudflare and Edgio

If you would invest  11,985  in Cloudflare on November 19, 2024 and sell it today you would earn a total of  5,131  from holding Cloudflare or generate 42.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cloudflare  vs.  Edgio Inc

Cloudflare

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 22 (%) 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.

Edgio Inc

Risk-Adjusted Performance

Very Weak

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 healthy forward indicators, Edgio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cloudflare and Edgio

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

The idea behind Cloudflare and Edgio 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.